Under Section 4 (2) (b) of the Companies Act in a company limited by guarantee the members undertake to contribute a certain amount to the assets of the company in the event of the company being wound up.It is the members’ liability and not the companies’ liability which is limited. The company is liable to pay all its debts without any limitation of liability if it has adequate assets.If the assets are not adequate, then the company can only be wound up as a human being who fails to pay his debts. Then a guarantee company is the most suitable if the company is non profit making.
sharon kalunda answered the question on April 15, 2019 at 05:28
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What are companies limited by shares?
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What are companies limited by shares?
Date posted:
April 15, 2019
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Answers (1)
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What is meant by the term Declaration of Compliance?
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What is meant by the term Declaration of Compliance?
Date posted:
April 15, 2019
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Answers (1)
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Explain how the Capital Authority can ensure:
(i) faster growth and development of the Nairobi Stock Exchange...
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Explain how the Capital Authority can ensure:
(i) faster growth and development of the Nairobi Stock Exchange or Stock Exchange in your country.
(ii) development of other stock exchanges in Kenya or in your country
Date posted:
February 7, 2019
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Answers (1)
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Mwinzi, a holder of shares in Hewa Airways Company Limited deposited his share certificate with a broker, Otieno. Otieno forged Mwinzi's signature on the share...
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Mwinzi, a holder of shares in Hewa Airways Company Limited deposited his share certificate with a broker, Otieno. Otieno forged Mwinzi's signature on the share certificate and transferred the shares to Kuria. When the share certificate and the transfer document were presented to the company for registration, the secretary wrote to Mwinzi advising him of the transfer. Mwinzi did not reply to this letter and Kuria was registered as the new shareholder. Kuria then transferred the shares to Wafula who was registered as the shareholder and a new certificate was issued.
Explain the effect of the forgery.
Date posted:
February 7, 2019
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Answers (1)
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Explain to a new shareholder of a central depository account the circumstances in which a central depository securities account may be suspended.
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Explain to a new shareholder of a central depository account the circumstances in which a central depository securities account may be suspended.
Date posted:
February 7, 2019
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Answers (1)
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Outline the reasons that may lead to suspension of promoters by a company.
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Outline the reasons that may lead to suspension of promoters by a company.
Date posted:
February 7, 2019
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Answers (1)
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Explain the preliminaries incidental to promotion of a company.
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Explain the preliminaries incidental to promotion of a company.
Date posted:
February 7, 2019
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Answers (1)
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Explain the effect of the failure by the company to register a charge of a debenture.
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Explain the effect of the failure by the company to register a charge of a debenture.
Date posted:
February 7, 2019
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Answers (1)
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Explain the circumstances when a dividend may become payable and enforceable as a debt against the company.
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Explain the circumstances when a dividend may become payable and enforceable as a debt against the company.
Date posted:
February 7, 2019
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Answers (1)
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(a) Explain the category of persons to whom an auditor owes a duty of care in the preparation of his audit report.
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(a) Explain the category of persons to whom an auditor owes a duty of care in the preparation of his audit report.
(b) Enumerate the rights accorded to an auditor to enable him perform his duties as the auditor of a company.
(c) In Hedley Byrne V. Heller (1964) the court held that provided that it could be established that a special relationship existed between parties it was possible for a person to sue for having suffered a financial loss even though no contractual relationship existed between the parties.
Highlight the factors that should be established in order for a third party to successfully sue an auditor for professional negligence.
Date posted:
February 7, 2019
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Answers (1)
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(a) Outline the qualified minority rights of a member which can only be enforced by the joint efforts of a membership group as defined under...
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(a) Outline the qualified minority rights of a member which can only be enforced by the joint efforts of a membership group as defined under the Companies Act.
(b) The Articles of X Company Ltd provide that every member is entitled to one vote for each of the first ten shares and thereafter to one vote for each additional ten shares. Jane owns one hundred shares. She transfers ten of her shares to her nine nominees to increase her voting powering general meetings. Joseph, who is the chairman at the general meeting, refuses to accept the votes of Jane‟s nominees.
Advise Jane on the validity of the Chairman‟s action and her right as a member.
Date posted:
February 7, 2019
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Answers (1)
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'The rule in the case of Ashbury Railway Carriage Vs. Riche (1875)stated that an act has not been authorized by the objects clause of a...
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'The rule in the case of Ashbury Railway Carriage Vs. Riche (1875)stated that an act has not been authorized by the objects clause of a company's Memorandum of Association in ultra vires to the company and the members cannot ratify it.'
Discuss.
b) Explain the various ways in which persons intending to form a company may avoid
personal liability on contracts they make on behalf of the proposed company.
c) It has been held that the memorandum and Articles of Association of a company shall, when registered, bind the company and the members to the same extent as if the documents has been signed and sealed by each member and contained covenants an the part of each member to observe all the provisions of the memorandum and the articles.
Explain the effect of this provision on the relationship between shareholders and their company and between shareholders themselves.
Date posted:
February 7, 2019
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Answers (1)
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(a) The principle of corporate legal personality is an important and fundamental aspect of company law.
Discuss this statement citing relevant decided cases....
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(a) The principle of corporate legal personality is an important and fundamental aspect of company law.
Discuss this statement citing relevant decided cases.
(b) Ropoff Company Ltd., a private limited company, has been under inquiry on alleged fraudulent financial transactions. The officers of the company under suspicion have denied any association with the company.
At the inquiry it was suggested that the corporate veil be lifted and the realities of the company in question be looked into.
Explain the instances when the veil of incorporation may be l
Date posted:
February 7, 2019
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Answers (1)
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Two years ago, Smart Limited issued a series of debentures in favor of Tumaini Bank. The debentures were in the Standard Bank form described as...
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Two years ago, Smart Limited issued a series of debentures in favor of Tumaini Bank. The debentures were in the Standard Bank form described as a fixed and floating charge over all the company‟s assets. There was an express term of the debenture that the company would not issue a subsequent fixed charge to rank in priority to the floating charge. Six months later, Smart Limited issued a fixed charge over its freehold property in favor of Mali Bank Mali Bank was unaware of the prohibition. Smart Limited has gone into liquidation and both banks are proving their debts on priority basis.
Discuss the legal position of each bank.
(c) The most common method of securing debentures is to execute a trust deed.
Explain the meaning of a trust deed and outline its advantages
Date posted:
February 7, 2019
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Answers (1)
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(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...
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(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
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Answers (1)
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(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
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Answers (1)
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(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
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Answers (1)
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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
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Answers (1)
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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...
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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
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Answers (1)
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(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
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Answers (1)