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Law Ii Question Paper

Law Ii

Course:

Exam Year:2008

QUESTION ONE

a. Define the term "floatation" and explain the procedure followed by a private company which intends to float its shares to the public (10mks)

b. Legally, a company's shares are like "goods". Consequently, the common law rule of "Caveat Emptor" applies to the sale of shares by a company. The company as the seller is not obliged to disclose anything to potential buyers which would enable the buyers to assess the risk involved in the proposed purchase.

There are however regulations which a company is required to comply with in a public issue of shares. These regulations constitute an attempt to impose on the company a duty to disclose the relevant facts.

Discuss the regulations to be complied with in a public issue of shares in your country (10mks)

QUESTION TWO

An allotment is the company's acceptance of an offer by the allottees to buy shares in the company.

With reference to the above statement:

a. Explain the common law rules that govern allotment of shares (8mks)

b. Briefly explain the statutory provisions regarding:

i. Void allotment (4mks)

ii. Voidable allotment (4mks)

c. Explain the returns that a limited company must make when alloting its shares as provided under Section 54 (1) of the Companies Act (4mks)

QUESTION THREE

With reference to company law, explain;

a. The meaning and consequences of the doctrine of separate legal personality (8mks)

b. The situations where the doctrine is likely to be ignored by the courts (12mks)

QUESTION FOUR
Section 96 (1) of the Companies Act requires the prescribed particulars of specified charges on a company's property or undertaking to be delivered to the Registrar for registration.

a. i. List and briefly describe the specified charges as provided for by the Act. (6mks)

ii. Outline the prescribed particulars of registered charges (4mks)

b. Central Park Company Limited submitted an application for an overdraft facility from Unity Bank Limited in July 2007. The overdraft was secured against a title deed of some of the company's property. Thereafter, a memorandum of charge on the security was executed but was not dated and neither was the charge registered with the Registrar.

The overdraft facility was approved by the bank. In the course of reviewing the securities held by the bank, the credit manager, on 10 January 2008, discovered that, the charge was undated. He subsequently filled in the date as 10 January 2008 and submitted the memorandum to the Registrar. The memorandum was thereafter registered on 31 January 2008 and a certificate of registration was duly issued to the bank.

The company has gone into liquidation.

Discuss the validity of the charge and the effect of non-registration within the stipulated period. (10mks)

QUESTION FIVE

a. Explain the provisions of the Companies Act, that govern the maintenance of books of account of a company. (8mks)

b. Briefly explain the grounds on which a person may be disqualified from being appointed as an auditor of a company. (4mks)

c. Discuss the duties of directors in relation to disclosure and state the legal consequences of non-disclosure. (8mks)

QUESTION SIX

Your former class mate, Mrs Timminah Seki, is an investor in one of the quoted companies in the country. There are speculations that the company is in financial distress and may be wound up.

Advise Mrs Timminah Seki on the following issues:

a. The similarities and differences between a transaction at undervalue and a preference (10mks)

b. The two ways in which a company may be voluntarily wound up (4mks)

c. The debts which are deemed preferential (6mks)

QUESTION SEVEN

a. Explain the purpose of company meetings (8mks)

b. Explain the rule in Sharp Vs Dawes and the exceptions thereof (12mks)

Law Ii Question Paper

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