April 2025 Company Law Past Paper Answers

Description

You will get Answers to these questions in Pdf format:

QUESTION ONE
(a) Your friend intends to start running a medium sized enterprise as a sole proprietor in his local town. He has come to you for advise on the possible challenges he might encounter as a result of operating his business.

Required:
Advise your friend on FOUR possible challenges about the form of business he intends to operate. (4 marks)
(b) John Martin wishes to register a company that will offer cleaning services. He is not sure on how to select a name for the company as he is afraid that the name he wishes to use might be rejected. He has come to you for advice.

Required:
With reference to the above statement, describe SIX circumstances when the registrar of companies might reject a proposed name. (6 marks)
(c) Kitabu Ltd., a private company incorporated in Kenya, is contemplating extending a loan to one of its directors, James Mutiso. The loan is intended to assist James Mutiso in purchasing a residential property in Runda.

Required:
Advise the board of directors on FIVE legal requirements of providing such a loan to James Mutiso. (10 marks)
(Total: 20 marks)

QUESTION TWO
(a) (i) Explain the meaning of a Central Depository. (2 marks)
(ii) Highlight SIX duties of a Central Depository. (6 marks)

(b) Discuss SIX rights of members of a registered company in your country. (12 marks)
(Total: 20 marks)
QUESTION THREE
(a) ABC Corporation, a publicly traded company in Kenya, intends to consolidate its share capital and simplify its capital structure by varying the rights attached to its multiple classes of preference shares. However, some preference shareholders are opposed to the proposed variation, arguing that it would unfairly prejudice their interests.

Required:
Discuss the legal principles and considerations involved in determining the permissibility of the variation of class rights in this scenario, taking into account the rights of dissenting shareholders and the company’s objectives.
(8 marks)

(b) Describe SIX classes of debentures. (12 marks)
(Total: 20 marks)

QUESTION FOUR
(a) During a board meeting of Pofu Limited, the directors approved a resolution authorising the company to secure a loan of Sh.10,000,000 to expand its operations. However, debate arose thereafter on whether the resolution required unanimous approval or a simple majority under the company’s Articles of Association. One of the directors claimed that the resolution did not follow the requisite steps of drafting resolution.
Required:
(i) Explain TWO ways in which the type of resolution affects its approval requirements. (4 marks)
(ii) Advise the Board of Pofu limited on the requisite steps of drafting a company resolution to avoid future problems. (6 marks)

(b) Summarise the process of the removal of a company secretary from the office in your country. (10 marks)
(Total: 20 marks)
QUESTION FIVE
(a) Outline FIVE contents of an auditor’s annual report. (5 marks)

(b) Highlight SEVEN responsibilities of an auditor in your country during the audit process. (7 marks)
(c) Financial statements of a company typically include some key components as required by the International Financial Reporting Standards (IFRS).

Required:
Describe FOUR of these key components. (8 marks)
(Total: 20 marks)

QUESTION SIX
(a) Identify FOUR types of liquidation of a company. (4 marks)

(b) In law, a liquidator is the officer appointed when a company goes into winding-up or liquidation to perform certain duties.
With reference to this statement, outline SIX duties of a liquidator. (6 marks)
(c) In relation to corporate structuring, explain the following concepts:
(i) Mergers. (2 marks)
(ii) Compromises. (2 marks)
(iii) Arrangements. (2 marks)
(iv) Reconstructions. (2 marks)
(v) Amalgamations. (2 marks)
(Total: 20 marks)
QUESTION SEVEN
(a) With reference to the Companies Act CAP 486, describe FIVE circumstances in which the name of a registered foreign company can be struck off from the register of foreign companies. (10 marks)
(b) In 2024, Zim Limited faced a decline in stock value amid allegations of financial misreporting. The company appointed an independent inspector with the power to examine company records, interview staff and audit financial statements. The investigations revealed fraudulent reporting by senior finance employees, leading to immediate dismissal of some employees and reforms in the company’s internal controls.
Required:
Explain FIVE reasons why the appointment of the independent inspector would prevent the issue from escalating.
(10 marks)
(Total: 20 marks)
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