Get premium membership and access revision papers, questions with answers as well as video lessons.

Law Ii Question Paper

Law Ii

Course:

Exam Year:

KENYA ACCOUNTANTS AND SECRETARIES NATIONAL EXAMINATIONS BOARD

CPA II

LAW II

Time: 3 hrs

Answer any FIVE questions.

ALL questions carry equal marks.

1.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 with a promoter must comply.(8 marks)

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

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

2.Anna and Berita are directors of Pesa Limited and each holds forty per cent 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 8th 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.(8 marks)

(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.(8 marks)

(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 per cent each.Pendo Limited will borrow money to buy Anna's shares and debentures.(4 marks)

3.Distinguish between the following classifications of debentures:

(a) Bearer debentures and registered debentures.(5 marks)

(b) Redeemable debentures and irredeemable debentures.(5 marks)

(c) Debentures and debenture stock.(5 marks)

(d) Unsecured debentures and secured debentures.(5 marks)

4.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 Jeremmy.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.(8 marks)

(ii) State the steps to be taken to register the transfer of shareholding from Joe to Jeremmy.(4 mark)

(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.(8 marks)

5 (a) The law governing the director's 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(8 marks)

(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 Ltd.

Modern Vehicles Ltd.then sells the trucks to Kamaliza Ltd.which 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.(12 marks)

6.(a) Enumerate the various types of charges that require registration as stated under the Companies Act.(8 marks)

(b) 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.(6 marks)

(c)The most common method of securing debentures to execute a trust deed.

Explain the meaning of a trust deed and outline its advantages.(6 marks)

7.Discuss the powers of the liquidator:

(a) With the sanction of the court.(10 marks)

(b) Without the sanction of the court.(10 marks)

8.(a) Explain the rules that govern quorum and the exceptions thereof.(14 marks)

(b) In relation to proxies,write brief notes on:

(i) General proxies.(3 marks)

(ii) Special proxies.(3 marks)

Law Ii Question Paper

More Question Papers

Popular Exams