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Law Ii Question Paper

Law Ii

Course:Cpa Part Ii

Institution: Pinnacle Business School question papers

Exam Year:2005

Answer any FIVE. questions

QUESTION ONE

Martha is engaged in the promotion of a company. She seeks your advice on several matters relating to the promotion of a company. You are required to advise her on the following matters:

a. The restrictions upon the choice of a corporate name which a promoter must comply (8mks)

b. The legal duties of a promoter with regard to her responsibility where she sells her own property to the company she is promoting (6mks)

c. The promoter's right to payment for her services by the company after incorporation (6mks)

QUESTION TWO

Anna and Berita are directors of Pesa Limited and each holds forty percent of the ordinary shares. The remainder is held by Charles.

In addition to the shares, Anna also holds debentures issued by Pesa Limited, redeemable on 8 August 2003. Anna wishes to dispose of her shares and debentures.

On the other hand, Berita and Charles do not wish Anna's substantial interest in the company to pass to other people upon the sale of the shares and debentures.

Advise Pesa Limited on the legality of each of the courses of action listed below:

a. Pesa Limited will raise the necessary funds and purchase the shares and debentures (8mks)

b. Pesa Limited will raise funds and lend them to Charles so that he may purchase Anna's debentures. Charles will also arrange for a private loan guaranteed by Pesa Limited so that he may purchase Anna's shares (8mks)

c. A new company, Pendo Limited, will be formed and eighty per cent of its ordinary shares will be held by Pesa Limited, Berita and Charles to hold ten percent each. Pendo Limited will borrow money to buy Anna's shares and debentures (4mks)

QUESTION THREE

Distinguish between the following classification of debentures:

a. Bearer debentures and registered debentures (5mks)

b. Redeemable debentures and irredeemable debentures (5mks)

c. Debentures and debenture stock (5mks)

d. Unsecured debentures and secured debentures (5mks)

QUESTION FOUR

a. Distinguish a company limited by shares from a company limited by guarantee (4mks)

b. What are the contents of the memorandum of association as stated in the Companies Act? (6mks)

c. Outline the documents that must be delivered to the registrar of companies together with the memorandum of association (10mks)

QUESTION FIVE

a. i. Citing decided cases, state and describe the characteristics of a 'derivative action' (8mks)

ii. Explain the disadvantages to a minority shareholder in bringing derivative action (6mks)

b. Jane Wangokho is a minority shareholder of Tuzo Company Limited.

John Daudi is the managing director and majority shareholder of Tuzo Company Limited.

Jane Wangokho has discovered that John Daudi has breached his duties as a director by purchasing goods from the company at a gross undervalue. A general meeting of the company at which John David attended and voted have ratified the sale.

Advise Jane Wangokho on the courses of action she may take. (6mks)

QUESTION SIX

Discuss the position of a company auditor with regard to the following:

a. A company wishes to remove its auditor from office before the next annual general meeting (8mks)

b. An auditor considers that he has been intentionally obstructed by company officers from carrying out his professional and statutory duties. (6mks)

c. EFG Company Limited purchared shares in PQR Company Limited on the basis of PQR Company Limited's audited accounts. Unfortunately, EFG Company Limited has incurred losses as a result of the purchase.

EFG Company Limited considers that the auditor was negligent in carrying out his audit

EFG Company Limited wishes to sue the auditor for the loss it has incurred. (6mks)

QUESTION SEVEN

a. Describe the following:

i. The committee of creditors in liquidation (5mks)

ii. The committee of creditors in administration proceedings (5mks)

b. Describe the meaning and essence of an application for early dissolution (10mks)

QUESTION EIGHT

a. In relation to special notice, state the following:

i. Objects of a special notice (4mks)

ii. The number of days required (2mks)

iii. The ordinary resolutions which require special notice (6mks)

b. In relation to company meetings, explain the following:

i. Issues that require special resolution (6mks)

ii. Support required for a special resolution to be passed (2mks)

Law Ii Question Paper

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