CPA Company law revision Archives - Page 3 of 14

Joan has inherited one million shillings from the estate of her late mother. She has decided to invest it in a small private company of which Janet and Jeffrey, her old friends are directors. However, Joan is not sure whether to lend the money to the company secured a debenture containing a fixed and floating charge or through purchase of ordinary preference shares. Joan now seeks your advise on the following issues: a) What is the difference between ordinary and preference shares, and what rights accrue to the holders of each class shares? b) i) What is the return on ordinary and preference share capital? ii) What are the restrictions that may be imposed on her ability to transfer any shares she may purchase in the Company?

Joan has inherited one million shillings from the estate of her late mother. She has decided to invest it in a small private company of which Janet and Jeffrey, her old friends are directors. However, Joan is not sure whether Read More …

Birds Limited has three directors: Peacock, Sparrow and Vulture. Explain the legal implication of each of the following situations: a) Vulture’s son has recently come of age and vulture wishes to appoint him a director of the company b) The company is considering the purchase of a substantial quantity of goods from fly ltd., in which sparrow has a large shareholding through he is not a director peacock and vulture are unaware of sparrow’s interest in fly ltd. c) Because of adverse publicity about peacock’s private life, vulture and sparrow wish to remove him as a director, since he refuses to resign d) In view of the adverse publicity, vulture and sparrow decide to exclude peacock from participation in the company’s affairs e) The directors are advised wise & co., the company’s auditors, that there is no possibility of the company trading at a profit in the foreseeable future and no reasonable prospect of its paying its debts

Birds Limited has three directors: Peacock, Sparrow and Vulture. Explain the legal implication of each of the following situations: a) Vulture’s son has recently come of age and vulture wishes to appoint him a director of the company b) The Read More …

State and briefly discuss the conditions which must be fulfilled before a company can either issue or redeem shares which are stated to be redeemable

State and briefly discuss the conditions which must be fulfilled before a company can either issue or redeem shares which are stated to be redeemable ANSWER A company may issue redeemable preference shares pursuant to the following conditions: • The Read More …

State the requirements of the Companies Act which relate to the company giving financial assistance for purchase of its own shares. What are the consequences of non – compliance with these requirements?

State the requirements of the Companies Act which relate to the company giving financial assistance for purchase of its own shares. What are the consequences of non – compliance with these requirements? ANSWER It is generally unlawful for a company Read More …

Identify five clauses contained in the Memorandum of Association

Identify five clauses contained in the Memorandum of Association ANSWER The various clauses of the memorandum of association are: 1. Name Clause: Contains the name of the company with limited as the last word of the name where the company’s Read More …

Naliaka owns 10% of the issued shares in Pendo Limited. There are two directors Wanyonyi and Wafula who have an eccentric style of management. They own 45% of the issued shares. Naliaka understands that Wanyonyi and Wafula want to merge Pendo Ltd. with another more profitable company that the two directors wholly own. If this plan goes ahead, Naliaka‟s shareholding will be reduced to 3% of the merged business. Naliaka is financially dependent on the dividends she gets from Pendo Limited and that future dividends may be much less. Advise Naliaka of her legal position and protection under the law if any.

Naliaka owns 10% of the issued shares in Pendo Limited. There are two directors Wanyonyi and Wafula who have an eccentric style of management. They own 45% of the issued shares. Naliaka understands that Wanyonyi and Wafula want to merge Read More …

Detail the conditions that have to be satisfied before an applicant can bring an action successfully under the exception to the rule in Foss v Harbottle.

Detail the conditions that have to be satisfied before an applicant can bring an action successfully under the exception to the rule in Foss v Harbottle ANSWER • The conduct complained of most at the lowest involve some fraud. • Read More …

In the context of voluntary winding up, explain the statutory provisions regarding the powers of the liquidator which may be exercisable: i) With the court sanction. ii) Without the court sanction.

In the context of voluntary winding up, explain the statutory provisions regarding the powers of the liquidator which may be exercisable: i) With the court sanction. ii) Without the court sanction. ANSWER i) In a compulsory winding up, the liquidator Read More …

i) Explain the doctrine of ultra vires with regard to the objects of a company ii) State the effects of ultra vires transactions iii) What are the purpose of the rule?

i) Explain the doctrine of ultra vires with regard to the objects of a company ii) State the effects of ultra vires transactions iii) What are the purpose of the rule? ANSWER i) The doctrine of ultra vires with regard Read More …

Name and briefly explain four classes of persons who may incur civil liability in respect of a false statement in a prospectus

Name and briefly explain four classes of persons who may incur civil liability in respect of a false statement in a prospectus ANSWER • Every person who was a promoter of the company at the time of issue. • Every Read More …