DECEMBER 2025 CPA CS Company Law Past Paper answers

Description

QUESTION ONE
(a) Outline FOUR legal principles governing the variation of class rights of shareholders. (4 marks)
(b) With reference to types of directors, explain the following terms:
(i) De jure director. (2 marks)
(ii) De facto director. (2 marks)
(iii) Shadow directors. (2 marks)
(c) Examine FIVE roles of companies limited by guarantee in promoting non-profit activities in your country.
(10 marks)
(Total: 20 marks)

QUESTION TWO
(a) With reference to Companies Act, analyse the concept of “true and fair view” in financial auditors’ report.(6 marks)
(b) Outline the process of issuing a prospectus with reference to the issue of shares in a company. (6 marks)
(c) B Limited is a private company incorporated in your country. One of its members, Jane Kirunyu holds 20,000 ordinary shares in the company. She requires a bank loan of Sh.5 million from one of the leading financial institutions and proposes to use her shares as security for the loan.
Required:
(i) Advise the financial institution on the legal options available for securing the loan using Jane’s shares. (3 marks)
(ii) Summarise FIVE legal requirements that must be satisfied for the security interest created over the shares to be valid and enforceable against the company and third parties. (5 marks) (Total: 20 marks)

QUESTION THREE
(a) XYZ Ltd. a public company, plans to hold its Annual General Meeting (AGM). Due to logistical and financial challenges, the company’s board is considering three options: holding the AGM physically at its registered office, hosting it entirely online via a video-conferencing platform or conducting it as a hybrid meeting, allowing both physical and virtual attendance.
As a senior manager in the company, you are required to advise the board on:
(i) FIVE conditions that must be satisfied for a virtual meeting to be valid. (5 marks)
(ii) Additional safeguards which must be considered while holding a hybrid meeting. (5 marks)
(b) Examine FIVE duties of financial statements auditors. (10 marks)
(Total: 20 marks)

QUESTION FOUR
(a) Highlight FOUR roles of the board of directors in authorising borrowing by a company. (4 marks)
(b) Outline SIX legal requirements for the register of shareholders in any company. (6 marks)
(c) Examine FIVE roles relating to execution of company documents under the Companies Act. (10 marks)
(Total: 20 marks)

QUESTION FIVE
(a) Highlight THREE obligations of a foreign company with regard to the service address under the Companies Act. (3 marks)
(b) Outline the priority of payments during liquidation of a company. (7 marks)
(c) Explain the legal procedure followed when the court is lifting the veil of incorporation of a company. (10 marks)
(Total: 20 marks)

QUESTION SIX
(a) Outline FOUR reasons for an investigation into the affairs of a company. (4 marks)
(b) Summarise the legal procedures involved in the company amalgamation of a company under the Companies Act. (6 marks)
(c) (i) With reference to legal personality, explain the rule in Foss Vs Harbottle. (2 marks)
(ii) Discuss FOUR exceptions in (c) (i) above. (8 marks)
(Total: 20 marks)

QUESTION SEVEN
(a) X Ltd. a milk processing company, passed a resolution in its annual general meeting to retain and deduct the sum of five shillings from the annual bonus payable to each shareholder, who is a dairy farmer, for the purposes of expansion of its milk processing plant. After such retention and collection of Sh.100 million, the board of directors held a board meeting and instead resolved to channel the retained amount to purchase a parcel of land for the company arguing that the said AGM did not take place and no such resolution was passed. Some of the shareholders have got wind of this development and are aggrieved with the decision of the board. Advise the shareholders about the following:
(i) The effect and legality of the resolution passed by the shareholders at the annual general meeting. (2 marks)
(ii) SIX statutory rules governing evidence of record of meetings and resolutions passed in a company which could be applied in support of their case. (6 marks)
(iii) The remedy available to the shareholders of X Ltd. (2 marks)
(b) Discuss FIVE remedies available to a lender who acted in good faith and without knowledge that a company borrowed beyond its powers in a case where a company has been cited for ultra vires borrowing. (10 marks)
(Total: 20 marks)