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-This problem is based on priority of charges created by the company. It is clear that the first charge in favor of Tumaini Bank had a negative pledge clause which prohibited Smart Ltd from creating a charge in priority thereof. But Smart Ltd created a fixed charge thereafter in favor of Mali Bank which claims ignorance of the prohibition.
- Tumaini Bank's charge has priority in that it was created first and had a negative pledge clause and covers all the assets of the company.
- Mali Banks fixed charge ranks second in that it was created after Tumaini Banks Charge. The contention that the bank was unaware of the prohibition is untenable as the bank as a 3rd party is deemed to know the contents of the company's public documents. This is because charges are registrar with the registrar of companies. Arguably, therefore the doctrine of constructive notice renders the banks argument unsustainable.
(c) This is a document issued by a company as security whenever series of debentures or debenture stock are issued.
-It is an acknowledgment that the company is indebted to trustees on behalf of the creditors.
-It confers upon the trustees a legal mortgage over all the company's assets.
- It embodies an undertaking by the company to honor its obligations to all creditors.
- It describes the nature of the security given, methods of redemption, circumstances in which the security may be realized meetings of creditors, powers of trustees etc.
- Facilitates protection of the company's assets or security for the benefit of all creditors.
- Trustees acquire a legal charge over all assets of the company.
-Trustees have the right to take possession of the security.
-Trustees are entitled to sell the security in the event of default.
marto answered the question on February 7, 2019 at 05:47
- Enumerate the various types of charges that require registration as stated under the
Companies Act.(Solved)
Enumerate the various types of charges that require registration as stated under the
Companies Act.
Date posted: February 7, 2019. Answers (1)
- (a) The law governing the directors' duty of care and skill takes account of the fact that the director may be a part-time counselor rather...(Solved)
(a) The law governing the directors' duty of care and skill takes account of the fact that the director may be a part-time counselor rather than a full-time professional manager.
Discuss.
(b) Mwerevu is one of the directors of Kamaliza Ltd. whose articles of association are in the form of Table A. He knows that his fellow directors are interested in obtaining motor vehicles from Modern Vehicles Ltd. to increase the company‟s fleet of trucks. Mwerevu purchases controlling shares in Modern Vehicles Ltd.
Modern Vehicles Ltd. then sells the trucks to Kamaliza Ltd. at Sh. 100,000 over and above the true market price. Mwerevu voted at the board meeting of Kamaliza Ltd. which decided on the purchase price, without revealing that he controlled the vendor company. When true facts are discovered, the company's board of directors does not protest against Mwerevu's conduct.
Mpole, a minority shareholder is aggrieved.
Advise him.
Date posted: February 7, 2019. Answers (1)
- (a) Joe owns 2000 shares in Lotto Limited and 1000 shares in Jolles Ltd. He sells all his shares in Lotto Limited to Janet and...(Solved)
(a) Joe owns 2000 shares in Lotto Limited and 1000 shares in Jolles Ltd. He sells all his shares in Lotto Limited to Janet and 500 shares in Jolles Ltd. to Jeremy. All the shares in Lotto Limited are partly paid up. Six months later, Lotto limited goes into liquidation.
(i) In the absence of any express agreement, discuss the liability of Joe and Janet in relation to the company's debts.
(ii) State the steps to be taken to register the transfer of shareholding from Joe and Jeremy.
(b) Outline the exceptional cases when a member may be held liable in excess of the limited liability which he undertook when he became a member of the company
Date posted: February 7, 2019. Answers (1)
- (i)State the circumstances under which the objects clause of a company may
be altered
(ii) Explain the procedure to be followed in altering...(Solved)
(i)State the circumstances under which the objects clause of a company may
be altered
(ii) Explain the procedure to be followed in altering the objects clause.
Date posted: February 7, 2019. Answers (1)
- In what way does the decision in the case of Macaura Versus Northern Assurance
Company Limited (1925) illustrate the corporate entity theory?
(Solved)
In what way does the decision in the case of Macaura Versus Northern Assurance
Company Limited (1925) illustrate the corporate entity theory?
Date posted: February 7, 2019. Answers (1)
- Mr. and Mrs. Matanguta intend to form a limited company known as M and M Hardware Limited. They approach you and seek you advice.
...(Solved)
Mr. and Mrs. Matanguta intend to form a limited company known as M and M Hardware Limited. They approach you and seek you advice.
Advise them on the following issues:
(i) What is the meaning of a private limited company according to the Companies Act?
(iii) Assuming Mr. and Mrs. Matanguta wish to convert the private company into a public company,
what would they be required to do?
Date posted: February 7, 2019. Answers (1)
- In relation to special notice, state the following:
(i) Objects of a special notice.
(ii) The number of days required.
(iii) The ordinary resolutions...(Solved)
In relation to special notice, state the following:
(i) Objects of a special notice.
(ii) The number of days required.
(iii) The ordinary resolutions which require special notice
Date posted: February 7, 2019. Answers (1)
- Describe the meaning and essence of an application for early dissolution. (Solved)
Describe the meaning and essence of an application for early dissolution.
Date posted: February 7, 2019. Answers (1)
- Describe the following:
(i) The committee of creditors in liquidation.
(ii) The committee of creditors in administration proceedings.
(Solved)
Describe the following:
(i) The committee of creditors in liquidation.
(ii) The committee of creditors in administration proceedings.
Date posted: February 7, 2019. Answers (1)
- Discuss the position of a company auditor with regard to the following:
(a) A company wishes to remove its auditor from office before the...(Solved)
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.
(b) An auditor considers that he has been intentionally obstructed by company officers
from carrying out his professional and statutory duties.
(c) EFG Company Limited purchased 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.
Date posted: February 7, 2019. Answers (1)
- Jane Wangokho is a minority shareholder of Tuzo Company Limited.
John Daudi is the managing director and majority shareholder of Tuzo Company Limited.
...(Solved)
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 Daudi attended and voted has ratified the sale.
Advise Jane Wangokho on the courses of action she may take.
Date posted: February 7, 2019. Answers (1)
- (i)Citing decided cases, state and describe the characteristics of a 'derivative action.'
(ii) Explain the disadvantages to a minority shareholder in bringing a derivative...(Solved)
(i)Citing decided cases, state and describe the characteristics of a 'derivative action.'
(ii) Explain the disadvantages to a minority shareholder in bringing a derivative action.
Date posted: February 7, 2019. Answers (1)
- Outline the documents that must be delivered to the registrar of companies together
with the memorandum of association.(Solved)
Outline the documents that must be delivered to the registrar of companies together
with the memorandum of association.
Date posted: February 7, 2019. Answers (1)
- Tama Quin Ltd., a company manufacturing pharmaceutical drugs is about to make a new issue of 400,000 shares of Sh. 40 each at the current...(Solved)
Tama Quin Ltd., a company manufacturing pharmaceutical drugs is about to make a new issue of 400,000 shares of Sh. 40 each at the current market price of Sh. 50 each.
The prospectus states: 'The company has just patented the manufacture of a drug that cures malaria.'
Jacob White, the managing director of the company is interviewed on television and he states that the news to be released shortly will demonstrate a great break-through in the control of malaria. He also stated that the company was the only one with modern technical knowledge of this great invention. As a result there is over-subscription of the shares.
Allan, who has not read the prospectus, applied for shares and is allotted 2000 at the price of Sh. 50 each.
Betty, who read the prospectus, is not allotted any shares but buys 3000 shares at the stock exchange at Sh. 60 per share.
Charles, who read the report of the interview in the national newspaper, bought 5000 shares at the stock exchange at Sh. 55 per share.
In the meantime, the patents are found not to be original and are revoked. The shares fall in value to Sh. 10 per share.
David who owned 10,000 shares in the company long before the new issue is disappointed as he believes the publicity has caused the shares to fall in price (value).
Advise Allan, Betty, Charles and David
Date posted: February 6, 2019. Answers (1)
- (b)
(i)State the circumstances under which the objects clause of a company may
be altered.
(ii) Explain the procedure to be followed in...(Solved)
(b)
(i)State the circumstances under which the objects clause of a company may
be altered.
(ii) Explain the procedure to be followed in altering the objects clause.
Date posted: February 6, 2019. Answers (1)
- In what way does the decision in the case of Macaura Versus Northern Assurance
Company Limited (1925) illustrate the corporate entity theory.(Solved)
In what way does the decision in the case of Macaura Versus Northern Assurance
Company Limited (1925) illustrate the corporate entity theory.
Date posted: February 6, 2019. Answers (1)
- Mr. and Mrs. Matanguta intend to form a limited company known as M and M Hardware Limited. They approach you and seek you advice.
...(Solved)
Mr. and Mrs. Matanguta intend to form a limited company known as M and M Hardware Limited. They approach you and seek you advice.
Advise them on the following issues:
(i) What is the meaning of a private limited company according to the Companies Act?
(ii) What are the advantages of forming a private company as opposed to a public company?
(iii) Assuming Mr. and Mrs. Matanguta wish to convert the private company into a public company, what would they be required to do?
Date posted: February 6, 2019. Answers (1)
-
In relation to company meetings, explain the following:
(i) Issues that require special resolution(Solved)
In relation to company meetings, explain the following:
(i) Issues that require special resolution
Date posted: February 6, 2019. Answers (1)
- Describe the meaning and essence of an application for early dissolution.
(Solved)
Describe the meaning and essence of an application for early dissolution.
Date posted: February 6, 2019. Answers (1)
- Describe the following:
(i) The committee of creditors in liquidation.
(ii) The committee of creditors in administration proceedings(Solved)
Describe the following:
(i) The committee of creditors in liquidation.
(ii) The committee of creditors in administration proceedings
Date posted: February 6, 2019. Answers (1)