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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: 3hrs

Answer any FIVE questions.

ALL questions carry equal marks.

(a) To what extend does the doctrine of constructive notice operate negatively?(4 marks)

(b) Y Ltd.whose articles are similar to Table A publish a weekly magazine.In one issue an article is critical of the policies of the city commission.A number of Commissioners who are also members of thee company requisition a general meeting and secure that passing of an ordinary resolution ordering the company to publish in the next issue a withdrawal of the criticism.The directors of the company are adamant.

The angry Commissioners approach you for the purpose of filling an action to compel the directors to publish a withdrawal.

Advise them.(12 marks)

(c) In what circumstances may a company accept shares surrendered by a member?(4 marks)

2.(a) Explain the remedies that are available to an investor who has been induced to take shares by false statements made in a prospectus.(4 marks)

(b) Explain how the capital of a company may be:

(i) altered;(4 marks)

(ii) reduced;(4 marks)

(iii) increased.(8 marks)

3.(a) What are the salient duties and powers of the Chairman of a general meeting of a company? Illustrate your answer with reference to decided cases.(10 marks)

(b) Outline the classes of persons who may effectively demand for a poll during a general meeting.(5 marks)

(c) Section 143(1,of the Companies Act Cap.486 provides that "A printed copy of every resolution or agreement to which this Section applies shall,within 30 days after the passing or making thereof, be delivered to the registrar for registration."

Identify five resolutions or agreements remittable under this section.(5 marks)

4.(a) Discuss this statement outlining the circumstances and conditions under which companies may reduce their capital.(14 marks)

(b) State what is meant by underwriting commission and distinguish it from brokerage.(6 marks)

5.(a) State the circumstances under which a company would be required to maintain an index of the register of members.(4 marks)

(b) Kazi bure borrowed Sh.50,000 from Tumaini bank and deposited his XYZ Supermarket Ltd's share certificate with a blank transfer as a security. Subsequently he bought goods from the Supermarket on credit.The goods were worth Sh.15,000.The articles of association of XYZ Supermarket Ltd.claims a first and paramount lien on its members' shares for debts due to the supermarket.However,before the supermarket lien arose, the bank gave the supermarket notice of Kazi Bure's share certificate having been lodged with the bank as a security for the loan.Kazi Bure is unable to pay the goods he obtained from the supermarket and he has also defaulted on the loan.XYZ Supermarket Ltd.wants to exercise its lien and bank wants to exercise its equitable right to have the shares transferred into its name.

In this situation,discuss the rights of:

(i) The bank.(6 marks)

(ii) XYZ Supermarket Ltd.(6 marks)

(c) Bob and Babs jointly own shares in PowerFoam Ltd.They are seeking your advice regarding their legal position as joint holders of the shares.

Advise them.(4 marks)

6.(a) Outline the various matters that require to be sanctioned by the members through a special resolution.(10 marks)

(b) In a company with a share capital:

(i) What are the members' rights to appoint a proxy?(2 marks)

(ii) What are the rights of the proxy so appointed? (2 marks)

(d) Explain the classes of persons who may petition the court for the compulsory winding up of a company.(6 marks)

7.(a) Discuss the rules relating to appointment and vacation of office of directors.(10 marks)

(b) Triple H, Undertaker,Austin and Flair are directors of Mieleka Ltd: a company regulated by Table A. Flair is the Managing Director and Undertaker is the Chairperson of the company.Sometime ago,the directors,meeting as a board,decided to:

(i) Lend Triple H Sh.500,000 to purchase a car for his wife Stephane for her personal use:

(ii) Advance Sh.500,000 to Austin to cover his expenses on a world-wide promotional tour on behalf of the company.

Booker T, the company secretary,informs you that Stone Cold, a shareholder claims that these transactions should have been approved by the members and that he intends to raise the matter during the next general meeting.

Required:

(i) Advise Booker T which of the transactions need approval by the members in a general meeting.(4 marks)

(ii) What are the consequences of the necessary approval not being obtained?(6 marks)

8.(a) Outline the information that is required when registering a charge.(8 marks)

(b) In July 2001,Muungano Limited obtained an overdraft from a bank upon deposit of title deeds and execution of a memorandum of charge.The memorandum was executed in due form by the company but left undated.The overdraft continued and subsequently the manager of the bank,filled in the date in the memorandum as 10 January 2002.The memorandum was then registered with the Registrar of Companies on 31 January 2002 and the Registrar's certificate to that effect was duly issued.(12 marks)

Law Ii Question Paper

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