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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. i. A basic fundamental rule of company law is that a company may not purchase its own shares.

Explain the exceptions of this rule. (8mks)

ii. Explain the advantages of a company purchasing its own shares. (6mks)

b. Outline the circumstances under which a company may give financial assistance for purchase of or subscription for its shares. (6mks)

QUESTION TWO

Citing relevant examples, state and explain the rule in Foss V Harbottle (1843) and the exceptions thereof. (20mks)

QUESTION THREE

With reference to company law, discuss the proposition that a company has separate legal personality from its members and the exceptions thereof. (20mks)

QUESTION FOUR

a. Define the term "promoter" (4mks)

b. Mr and Mrs. Karanja, who intend to form a limited liability company known as Central Construction Company Ltd. approached Jijenge Bank for a loan to purchase office furniture and stationery. A loan of Sh. 1 million was given by the bank. Subsequently, the company was incorporated. However, the business did not flourish and the company was unable to pay the loan as and when the installments fell due. When the bank sent a demand notice to the company, Matata, a shareholder who opposed the demand notice, said that the company was not liable to repay the loan. Mr and Mrs Karanja, now want to alter the objects clause in the memorandum of association to include a clause authorizing the company to effect the payment but Matata is still opposed to the proposal.

Discuss the legal position of the bank and the validity of the proposed alteration. (16mks)

QUESTION FIVE

a. What are the directors' rights with regard to receiving remuneration and compensation for loss of office? (6mks)

b. Outline the procedure that a company must follow if it wishes to offer a director a service contract for more than five years. (4mks)

c. Although the directors of a company are its agents, they are also held as trustees of the company's money and property. However, their position as trustees of the company differs from that of ordinary trustees.

Discuss. (10mks)

QUESTION SIX

a. Outline the resolutions which may be passed for voluntary winding up of a company. (6mks)

b. State the persons who may petition for the winding up of a company by the court. (4mks)

c. Explain the consequences of a voluntary winding up of a company limited by shares. (10mks)

QUESTION SEVEN

a. Advise the Board of directors of Excellent Home Care Agencies Ltd. on the following matters:

i. The length of notice to be given before an annual general meeting can be held. (4mks)

ii. The ordinary business transacted at such meetings (4mks)

b. As you are leaving a meeting of the board of directors, you met Mr. Shida, a shareholder, who is aggrieved that since the time the company was incorporated three years ago, no annual general meeting has ever been held by the company. He seeks your advice.

Advise him. (12mks)

QUESTION EIGHT

a. Explain the similarities and differences between shares and debentures. (14mks)

b. Wheels Limited issued a debenture to East Bank two years ago. The debenture was in the standard bank form described as a fixed and floating charge over all the assets of the company. However, due to inadvertence, the charge was not dated nor registered within time. The company is now in liquidation and the loan is in arrears. The bank seeks your legal advice as to whether it can rely on the charge to prove its claim in the winding up proceedings of the company.

Advise the bank. (6mks)

Law Ii Question Paper

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