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Law Ii Question Paper

Law Ii

Course:Law Ii

Exam Year:2008

KASNEB
CPA PART II
LAW II
FRIDAY: 5 December 2008.
Answer any FIVE questions.
QUESTION ONE
(a) Mr Ananeas Kipkemboi and Mr Josiah Tum have for several years been trading as a
partnership in the logging business in the Rift Valley Province. The partnership has
continued to prosper and the two partners have decided to convert the partnership
into a registered private company.

Advise Mr Kipkemboi and Mr Tum on the legal effect of registration of a company.
(8 marks)

(b) The partnership referred to in (a) above has been registered as a private company by
the name Timberland Company Limited with Mr Kipkemboi and Mr Tum as directors. The
two directors wish to take advantage of a government offer for financial assistance
to farmers willing to invest in agricultural products.

Advise the directors of Timberland Company Limited on:

(i) The meaning and implication of the doctrine of ultra vires. (4 marks)

(ii) The procedure to follow in order to take advantage of the offer by the
government. (8 marks)

QUESTION TWO
(a) Whether a person is or is not a promoter is a matter of fact than law.

Explain the ways in which a promoter may escape personal liability on
pre-incorporation contracts. (6 marks)

(b) Clause 8 in the articles of association of Alpha Company Limited provides that:"Every
shareholder who intends to transfer shares shall inform the directors of the company
and offer the shares to the directors or the other shareholders first and those
directors and shareholders may purchase the share".

One of the shareholders of the company, Mr Suleiman Matata has informed the directors
of his intention to sell some of his shares. However, none of the directors or
shareholders is willing to purchase the shares.

Discuss the legal implication of Clause 8 of the articles of association of Alpha
Company Limited with reference to Section 22 of the Companies Act and advise
Mr Suleiman Matata. (14 marks)

QUESTION THREE
(a) The share capital of a company may be altered under Section 63 of the Companies Act
provided the company follows the procedures set down.

Explain the rules and procedures governing the alteration of share capital. (8 marks)

(b) (i) Discuss the circumstances under which providing financial assistance by a
company may be held to be lawful (6 marks)

(ii) Outline the legal requirements that the directors of a company should comply
with in order to protect creditors before providing financial assistance to any
recipient. (6 marks)

QUESTION FOUR
In relation to floating charges explain:

(a) The characteristics of a floating charge. (6 marks)

(b) The events which would lead to crystallization of a floating charge. (8 marks)

(c) The legal effect of crystallization of a floating charge. (6 marks)

QUESTION FIVE
With reference to the Companies Act, explain the provisions of the Act which ensure that the majority shareholders do not conduct the affairs of the company with complete disregard
of the interest of the minority shareholders. (20 marks)

QUESTION SIX
(a) Explain the advantages of private companies over public companies. (10 marks)

(b) Outline the formalities and requirements that a private company is allowed to
dispense with through an elective resolution. (10 marks)

QUESTION SEVEN
(a) Explain the circumstances under which a company shall be deemed to be unable to pay
its debts as provided for under Section 220 of the Companies Act (6 marks)

(b) Discuss the powers of a liquidator, which he may exercise with or without the
sanction of the court as provided for under Section 241 and Section 268 of the
Companies Act. (14 marks)

QUESTION EIGHT
Explain the ways in which a person may cease to be a member of a company. (20 marks)

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Law Ii Question Paper

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