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Can only be instituted in circumstances in which there is fraud on the minority.
- The minority must discharge the heavy burden of proof i.e. the company is entitled to the remedy sought and that the company cannot itself sue.
- The minority shareholder has no legal right to bring a derivative action.
- The minority must not have participated in the wrongful act complained of
- Legal costs are only recoverable if the action is successful.
- The case may be struck off at the instance of the defendant.
marto answered the question on February 7, 2019 at 05:13
- (i)Citing decided cases, state and describe the characteristics of a 'derivative action.'
(ii) Explain the disadvantages to a minority shareholder in bringing a derivative...(Solved)
(i)Citing decided cases, state and describe the characteristics of a 'derivative action.'
(ii) Explain the disadvantages to a minority shareholder in bringing a derivative action.
Date posted: February 7, 2019. Answers (1)
- Outline the documents that must be delivered to the registrar of companies together
with the memorandum of association.(Solved)
Outline the documents that must be delivered to the registrar of companies together
with the memorandum of association.
Date posted: February 7, 2019. Answers (1)
- 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...(Solved)
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. Answers (1)
- (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. Answers (1)
- 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 6, 2019. Answers (1)
- Mr. and Mrs. Matanguta intend to form a limited company known as M and M Hardware Limited. They approach you and seek you advice.
...(Solved)
Mr. and Mrs. Matanguta intend to form a limited company known as M and M Hardware Limited. They approach you and seek you advice.
Advise them on the following issues:
(i) What is the meaning of a private limited company according to the Companies Act?
(ii) What are the advantages of forming a private company as opposed to a public company?
(iii) Assuming Mr. and Mrs. Matanguta wish to convert the private company into a public company, what would they be required to do?
Date posted: February 6, 2019. Answers (1)
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In relation to company meetings, explain the following:
(i) Issues that require special resolution(Solved)
In relation to company meetings, explain the following:
(i) Issues that require special resolution
Date posted: February 6, 2019. Answers (1)
- Describe the meaning and essence of an application for early dissolution.
(Solved)
Describe the meaning and essence of an application for early dissolution.
Date posted: February 6, 2019. Answers (1)
- Describe the following:
(i) The committee of creditors in liquidation.
(ii) The committee of creditors in administration proceedings(Solved)
Describe the following:
(i) The committee of creditors in liquidation.
(ii) The committee of creditors in administration proceedings
Date posted: February 6, 2019. Answers (1)
- Discuss the position of a company auditor with regard to the following:
(a) A company wishes to remove its auditor from office before the...(Solved)
Discuss the position of a company auditor with regard to the following:
(a) A company wishes to remove its auditor from office before the next annual general
meeting.
(b) An auditor considers that he has been intentionally obstructed by company officers
from carrying out his professional and statutory duties.
(c) EFG Company Limited purchased shares in PQR Company Limited on the basis of
PQR Company Limited‟s audited accounts. Unfortunately, EFG Company Limited has incurred losses as a result of the purchase.
EFG Company Limited considers that the auditor was negligent in carrying out his audit.
EFG Company Limited wishes to sue the auditor for the loss it has incurred.
Date posted: February 6, 2019. Answers (1)
- Jane Wangokho is a minority shareholder of Tuzo Company Limited.
John Daudi is the managing director and majority shareholder of Tuzo Company Limited.
...(Solved)
Jane Wangokho is a minority shareholder of Tuzo Company Limited.
John Daudi is the managing director and majority shareholder of Tuzo Company Limited.
Jane Wangokho has discovered that John Daudi has breached his duties as a director by purchasing goods from the company at a gross undervalue. A general meeting of the company at which John Daudi attended and voted has ratified the sale.
Advise Jane Wangokho on the courses of action she may take.
Date posted: February 6, 2019. Answers (1)
- Explain the disadvantages to a minority shareholder in bringing a derivative action.
(Solved)
Explain the disadvantages to a minority shareholder in bringing a derivative action.
Date posted: February 6, 2019. Answers (1)
-
Citing decided cases, state and describe the characteristics of a derivative action.(Solved)
Citing decided cases, state and describe the characteristics of a derivative action.
Date posted: February 6, 2019. Answers (1)
- Outline the documents that must be delivered to the registrar of companies together
with the memorandum of association.(Solved)
Outline the documents that must be delivered to the registrar of companies together
with the memorandum of association.
Date posted: February 6, 2019. Answers (1)
- What are the contents of the memorandum of association as stated in the...(Solved)
What are the contents of the memorandum of association as stated in the
Companies Act?
Date posted: February 6, 2019. Answers (1)
- Distinguish a company limited by shares from a company limited by guarantee.
(Solved)
Distinguish a company limited by shares from a company limited by guarantee.
Date posted: February 6, 2019. Answers (1)
- Distinguish between the following classifications and debentures:
(a) Bearer debentures and registered debentures.
(b) Redeemable debentures and irredeemable debentures.
(c) Debentures and debenture...(Solved)
Distinguish between the following classifications and debentures:
(a) Bearer debentures and registered debentures.
(b) Redeemable debentures and irredeemable debentures.
(c) Debentures and debenture stock
(d) Unsecured debentures and secured debentures
Date posted: February 6, 2019. Answers (1)
- Anna and Berita are directors of Pesa Limited and each holds forty per cent of the ordinary shares. The remainder is held by Charles.
...(Solved)
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 8 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.
(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.
(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
Date posted: February 6, 2019. Answers (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...(Solved)
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 which a promoter must
comply.
(b) The legal duties of a promoter with regard to her responsibility where she sells her
own property to the company she is promoting.
(c) The promoter's right to payment for her services by the company after
incorporation.
Date posted: February 6, 2019. Answers (1)
- Section 213 of the Companies Act qualifies the liability of past and present members as contributors. Explain these qualifications as provided for in the...(Solved)
Section 213 of the Companies Act qualifies the liability of past and present members as contributors. Explain these qualifications as provided for in the Companies Act.
Date posted: February 6, 2019. Answers (1)