(a) In preparing his audit report the auditor owes a duty of care to:
- The company: since an auditor is a professional engaged by the company to render certain services he owes the Company a legal duty of care in preparing his report.
- Third parties: an auditor owes a legal duty of care to third parties whom he knew or reasonably ought to have known would rely upon his audit report. To that effect such parties are his 'neighbours' and the auditor may be-
Held liable for loss or liability arising by reason of reliance on his audit report.
- The auditor's legal duty of care is founded on the premise that there is a special relationship between him and the company as well as such third parties.
(b) - Right to examine the company's books, vouchers and other relevant documents.
- Right to access to the Company's books vouchers, accounts etc.
-Right to demand an explanation from officers of the company.
- Right to seek professional advise whenever necessary.
-Right to attend all general meetings of the Company.
- Right to be heard in general meeting on any matter concerning him as an auditor.
- Right to all notices and other communication to members.
- Right to rely on information provided by trusted servants of the company (in absence of suspicion)
- Right to remuneration for services rendered.
- Right to indemnity for any loss or liability arising in the course of discharging his obligations as auditor.
(c) For a third party to successfully sue an auditor in damages for professional negligence it must be established that:
- The auditor was engaged on the premise that he professed to have certain skills.
- The auditor was at all material times aware that his report would be relied upon i.e. he knew or reasonably ought to have known.
- The third party suffered loss of financial nature
marto answered the question on February 7, 2019 at 06:27
- (a) Outline the qualified minority rights of a member which can only be enforced by the joint efforts of a membership group as defined under...(Solved)
(a) Outline the qualified minority rights of a member which can only be enforced by the joint efforts of a membership group as defined under the Companies Act.
(b) The Articles of X Company Ltd provide that every member is entitled to one vote for each of the first ten shares and thereafter to one vote for each additional ten shares. Jane owns one hundred shares. She transfers ten of her shares to her nine nominees to increase her voting powering general meetings. Joseph, who is the chairman at the general meeting, refuses to accept the votes of Jane‟s nominees.
Advise Jane on the validity of the Chairman‟s action and her right as a member.
Date posted: February 7, 2019. Answers (1)
- 'The rule in the case of Ashbury Railway Carriage Vs. Riche (1875)stated that an act has not been authorized by the objects clause of a...(Solved)
'The rule in the case of Ashbury Railway Carriage Vs. Riche (1875)stated that an act has not been authorized by the objects clause of a company's Memorandum of Association in ultra vires to the company and the members cannot ratify it.'
Discuss.
b) Explain the various ways in which persons intending to form a company may avoid
personal liability on contracts they make on behalf of the proposed company.
c) It has been held that the memorandum and Articles of Association of a company shall, when registered, bind the company and the members to the same extent as if the documents has been signed and sealed by each member and contained covenants an the part of each member to observe all the provisions of the memorandum and the articles.
Explain the effect of this provision on the relationship between shareholders and their company and between shareholders themselves.
Date posted: February 7, 2019. Answers (1)
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(a) The principle of corporate legal personality is an important and fundamental aspect of company law.
Discuss this statement citing relevant decided cases....(Solved)
(a) The principle of corporate legal personality is an important and fundamental aspect of company law.
Discuss this statement citing relevant decided cases.
(b) Ropoff Company Ltd., a private limited company, has been under inquiry on alleged fraudulent financial transactions. The officers of the company under suspicion have denied any association with the company.
At the inquiry it was suggested that the corporate veil be lifted and the realities of the company in question be looked into.
Explain the instances when the veil of incorporation may be l
Date posted: February 7, 2019. Answers (1)
- (a) Explain the rules that govern quorum and the exceptions thereof
(b) In relation to proxies, write brief notes on:
(i) General proxies.
(ii) Special proxies....(Solved)
(a) Explain the rules that govern quorum and the exceptions thereof
(b) In relation to proxies, write brief notes on:
(i) General proxies.
(ii) Special proxies.
Date posted: February 7, 2019. Answers (1)
- Discuss the powers of the liquidator:
(a) With the sanction of the court.
(b) Without the sanction of the court(Solved)
Discuss the powers of the liquidator:
(a) With the sanction of the court.
(b) Without the sanction of the court
Date posted: February 7, 2019. Answers (1)
- 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...(Solved)
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.
(c) The most common method of securing debentures is to execute a trust deed.
Explain the meaning of a trust deed and outline its advantages
Date posted: February 7, 2019. Answers (1)
- Enumerate the various types of charges that require registration as stated under the
Companies Act.(Solved)
Enumerate the various types of charges that require registration as stated under the
Companies Act.
Date posted: February 7, 2019. Answers (1)
- (a) The law governing the directors' duty of care and skill takes account of the fact that the director may be a part-time counselor rather...(Solved)
(a) The law governing the directors' 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.
Discuss.
(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 Vehicles Ltd.
Modern Vehicles Ltd. then sells the trucks to Kamaliza Ltd. 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.
Date posted: February 7, 2019. Answers (1)
- (a) Joe owns 2000 shares in Lotto Limited and 1000 shares in Jolles Ltd. He sells all his shares in Lotto Limited to Janet and...(Solved)
(a) 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 Jeremy. 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.
(ii) State the steps to be taken to register the transfer of shareholding from Joe and Jeremy.
(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
Date posted: February 7, 2019. Answers (1)
- (i)State the circumstances under which the objects clause of a company may
be altered
(ii) Explain the procedure to be followed in altering...(Solved)
(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 7, 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 7, 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?
(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 7, 2019. Answers (1)
- In relation to special notice, state the following:
(i) Objects of a special notice.
(ii) The number of days required.
(iii) The ordinary resolutions...(Solved)
In relation to special notice, state the following:
(i) Objects of a special notice.
(ii) The number of days required.
(iii) The ordinary resolutions which require special notice
Date posted: February 7, 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 7, 2019. Answers (1)
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(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 7, 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 7, 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 7, 2019. Answers (1)
- (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)