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Law Ii Question Paper

Law Ii

Course:

Exam Year:

KENYA ACCOUNTANTS AND SECRETARIES NATIONAL EXAMINATIONS BOARD

CPA PART II

LAW II

Time: 3 hrs

Answer any FIVE questions.

ALL questions carry equal marks.

In relation to company:

(a) Explain the meaning of the term "Promoter."

(b) Discuss the rules that govern pre-incorporation contracts.(6 marks)

(c) Describe the common law duties of a promoter.(10 marks)

2.Hopeful, a private limited company has adapted table A as its Articles of Association. The company now wishes to alter the Articles of Association.

(a) Outline the procedure to be followed to effect the change.(10 marks)

(b) Wafula, one of the directors of Hopeful Co.Ltd is unsure of his duty of care and skills as a director of the company.He seeks your advice on this.

Advise him.(10 marks)

3.(a) Explain the statutory and common law rules that govern raising and maintenance of share Capital of a company.(10 marks)

(b) Define the term "prospectus" and explain the circumstances under which a company may issue a prospectus.(10 marks)

4.The Rule in Foss-v-Harbottle establishes the principle that where a wrong is done to the company,the proper plaintiff is the company itself.However,where the wrong is done by the company directors,it may be impossible for the company to sue.In such a case, a derivative action may be the only option.

(a) Explain what is meant by "derivative action."(10 marks)

(b) Describe the conditions that must be satisfied before a derivative suit can be instituted.(10 marks)

5.(a) Highlight the requirements to be met before a notice of meeting served on members can be held to be valid.(10 marks)

(b) Describe the duties of an Auditor as out under the Companies Act.(10 marks)

6.Distinguish a fixed charge from a floating charge.(6 marks)

(b) The directors of Alumnasi Co.Ltd borrowed Sh.20 million from Maendeleo Bank.The bank was informed that the money was intended to be used to expand the company's horticultural business.The bank however,did not ask for the company's memorandum of Association and lent the money.The money was spent for purposes not intended.These facts have come to light and Maendeleo bank seeks your advice on whether the bank can successfully recover the money.

Advise the bank.(8 marks)

(d) Outline the legal rules that govern the appointment of an Administrative Receiver by a holder of a floating charge.(6 marks)

7.(a) Describe the circumstances under which a company may be wound up on the ground that it is "just and equitable" to do so.(12 marks)

(b) State the legal consequences of a winding up order made against a company.(8 marks)

8.(a) Detail the statutory provisions governing the investigation into the affairs of a company by the Registrar.(12 marks)

(b) State the powers of the Inspector appointed to investigate the affairs of the company.(4 marks)

(c) Explain who is responsible for the expenses incurred while carrying out investigations into the company's affairs.(4 marks)

Law Ii Question Paper

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