Company Law Revision Kit ( Past Papers With Answers)

SAMPLE WORK

Complete copy of CPA COMPANY LAW REVISION KIT is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHER’S APP) and in HARD copy 

Phone: 0728 776 317

Email: [email protected]

QUESTION 1

April 2026 Question One B and C

(b) Explain THREE legal consequences of incorporation of a company.      (6 marks)

(c) Renewable Vision Ltd. was recently formed by a group of investors intending to manufacture solar-powered irrigation equipment. Before the company was incorporated, the promoters entered into the following transactions in the name of the proposed company:

1. A contract for lease of factory premises.
2. A contract for supply of specialist machinery.
3. A contract for employment of a technical manager.

After incorporation, a dispute arose as to whether the company was bound by the transactions entered into before registration. One of the shareholders also claimed that the company had started undertaking activities not contemplated in its constitute documents.

 

Required:

(i)  Advise the parties on THREE legal effects of contracts entered into on behalf of a company before its incorporation.             (6 marks)

(ii) Explain the legal significance of the articles of association.          (4 marks)

 

MASOMO MSINGI ANSWER

(b)  Key legal consequences of incorporation:

1. Separate Legal Personality: Once incorporated, the company is a distinct “legal person” in the eyes of the law, independent of its shareholders and directors. It can enter into contracts, own property, and incur liabilities in its own name.
2. Limited Liability: One of the most significant consequences is that the liability of the members is generally limited to the amount unpaid on their shares. This ensures that the personal assets of the shareholders are protected if the company becomes insolvent.
3. Perpetual Succession: The company’s existence is not affected by changes in its membership, such as the death, bankruptcy, or transfer of shares by a member. It continues to exist as a legal entity until it is formally liquidated or dissolved.
4. Capacity to Sue and Be Sued: As a legal person, the company can take legal action to enforce its rights and can similarly be held legally accountable for its actions in a court of law.
5. Transferability of Shares: Membership in an incorporated company is generally transferable, allowing members to sell or move their interests without affecting the company’s underlying business or legal status.
6. Professional Management: Incorporation often leads to a separation of ownership and management. While shareholders own the company, it is managed by a board of directors who owe fiduciary duties to the entity.

 (c) (i) Legal effects of contracts entered into before incorporation

1. The company is generally not bound by the contract

Before incorporation, the company does not exist as a legal person and therefore lacks capacity to contract. Consequently, Renewable Vision Ltd. is not automatically bound by the lease agreement, machinery supply contract, or employment contract made before registration.

2. The promoters may be personally liable

Since the company did not exist at the time the contracts were made, the promoters who entered into the contracts may incur personal liability unless the contract expressly excluded such liability. The other contracting parties may sue the promoters for breach.

3. The company may adopt or novate the contracts after incorporation

After incorporation, the company may choose to enter into a fresh agreement adopting the terms of the earlier contracts. Once adopted through novation or ratification allowed under statute, the company becomes bound and assumes rights and obligations under the contracts.

 (ii) Legal significance of the articles of association

1. They regulate the internal management of the company

The articles of association contain rules governing the company’s internal affairs, including meetings, voting rights, appointment of directors, and transfer of shares.

2. They form a contractual relationship

The articles constitute a binding contract:

• Between the company and its members; and
• Among the members themselves.

Members may enforce rights contained in the articles against the company.

3. They define powers and procedures of company organs

The articles prescribe how directors and shareholders exercise their powers and how decisions are made within the company.

4. They restrict the company from acting outside its constitutional framework

If Renewable Vision Ltd. undertakes activities not contemplated in its constitutional documents, shareholders may challenge such acts as being inconsistent with the company’s authorised objectives and governance structure.

QUESTION 2

December 2025 Question One C

Examine FIVE roles of companies limited by guarantee in promoting non-profit activities in your country.                 (10 marks)

 MASOMO MSINGI ANSWER

Roles of Companies Limited by Guarantee in Promoting Non-Profit Activities in Kenya

Companies limited by guarantee are commonly used in Kenya for non-profit and charitable purposes, as they do not have share capital and profits are reinvested to achieve stated objectives.

1. Promotion of charitable and social welfare activities
   They support activities such as poverty alleviation, disaster relief, support for vulnerable groups, and community development, helping address social challenges without profit motives.
2. Advancement of education and research
   Many educational institutions, training centres, professional bodies, and research organizations are registered as companies limited by guarantee to promote learning, skills development, and innovation.
3. Support for religious, cultural, and environmental causes
   Such companies promote religious activities, preserve cultural heritage, and support environmental conservation initiatives, contributing to moral, cultural, and ecological development.
4. Provision of legal personality and continuity
   Being incorporated entities, they can own property, enter contracts, sue and be sued in their own name. This enhances accountability, credibility, and continuity of non-profit activities beyond individual members.
5. Attraction of funding and partnerships
   Their formal structure and non-profit status make them attractive to donors, development partners, government agencies, and international organizations, thereby mobilizing resources for public benefit projects.

 

QUESTION 3

December 2025 Question Five C

Explain the legal procedure followed when the court is lifting the veil of incorporation of a company.              (10 marks)

 MASOMO MSINGI ANSWER

The doctrine of the veil of incorporation generally protects shareholders, directors, and officers of a company from personal liability for the company’s actions. This means the company is treated as a separate legal entity, distinct from its owners or managers. However, in certain circumstances, the Court may “lift” or “pierce” the corporate veil to hold individuals personally liable for the company’s actions. This procedure is used to prevent abuse of the corporate structure for unlawful purposes.

Links Below have Company Law Revision Kit (CPA Past Past Papers With Answers) in Soft copies

Android App Link – Click to Download 

PC/ IOS / Tablet / Android – Click to Access

 

 

 

The following outlines the legal procedure and grounds for lifting the veil of incorporation:

1. Filing a Petition/Application:

The aggrieved party (creditors, shareholders, or other interested parties) must file a petition or application in the Court requesting the lifting of the veil. The petition must demonstrate the grounds on which the corporate veil should be lifted (e.g., fraud, oppression, evasion of legal obligations).

2. Presentation of Evidence

The applicant must present sufficient evidence that the company is being misused or its corporate status is being abused. This might include showing that:

• The company is being used as a sham,
• The individuals behind the company are engaging in fraudulent conduct, or
• There is an improper purpose for the company’s existence.

Witness testimony and documents supporting the claim may be presented to show that the company’s legal personality is being misused.

3. Examination by the Court

Once the petition is filed and the evidence is presented, the Court will examine whether there are valid grounds for lifting the veil. The Court will consider whether the company was acting beyond its legal rights or misusing its separate personality.

The Court may order discovery of documents, summon witnesses, or order an audit of the company’s operations to assist in the investigation.

4. Decision of the Court

If the Court is satisfied that the corporate veil should be lifted, it will issue an order. The order may involve:

• Holding individuals personally liable for the company’s actions (e.g., directors or shareholders),
• Restoring rights to aggrieved parties (e.g., shareholders or creditors),
• Ordering the reversal of transactions made by the company for unlawful purposes.

The Court’s order may also include directions for the company to compensate creditors or make other reparations.

5. Appeal Process

A decision to lift the veil can be appealed. If any party is dissatisfied with the Court’s ruling, they may appeal to a higher court, where the decision will be reviewed.

 

QUESTION 4

August 2025 Question One A

Enumerate FOUR limitations of a private limited company.            (4 marks)

 

MASOMO MSINGI ANSWER

Limitations of a private limited company

1. Limited Capital Raising Ability: Private limited companies cannot sell shares to the public, which restricts their ability to raise large amounts of capital compared to public companies.
2. Restrictions on Share Transfer: Shares in a private limited company are not freely transferable. Shareholders often need approval from other members before selling their shares, limiting liquidity.
3. Compliance and Regulatory Burden: Even though it’s private, the company must adhere to legal and regulatory requirements such as filing annual returns, maintaining statutory records, and undergoing audits, which can be costly and time-consuming.
4. Limited Growth Potential: Due to restrictions on the number of shareholders (usually capped at 50, depending on jurisdiction) and fundraising options, private limited companies may face limits in scaling operations compared to larger public companies.

 

QUESTION 5

April 2025 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)

 

MASOMO MSINGI ANSWER

Possible challenges about the form of business he intends to operate

1. He has to provide all the capital
2. In case of losses he will bear it all alone
3. He will have to work for long hours to increase profits and this in the long run affects his health
4. There is no scope in sharing ideas for the improvement of the business

 

QUESTION 6

December 2024 Question One A and B

(a) Outline FOUR characteristics that define the legal framework within which companies operate in Kenya.              (4 marks)

(b) Explain TWO differences between a “holding company” and a “subsidiary company”. (4 marks)

MASOMO MSINGI ANSWER

a) Characteristics that define the legal framework within which companies operate in Kenya

In Kenya, the legal framework governing companies is shaped by various laws, regulations, and institutional structures. Here are four key characteristics that define this framework:

1. Incorporation and Registration: Companies must adhere to the Companies Act (2015), which details registration procedures, including documentation requirements and minimum share capital. The Registrar of Companies oversees this process.
2. Corporate Governance: There is a strong emphasis on governance standards, outlining the roles of directors and shareholder rights. The Companies Act establishes guidelines for board activities, and listed companies follow additional regulations from the Capital Markets Authority.
3. Shareholder Rights Protection: The framework protects shareholders’ rights to participate in decisions, access financial information, and seek legal recourse in cases of unfair treatment, particularly for minority shareholders.
4. Regulatory Oversight: Multiple regulatory bodies, such as the Registrar of Companies and the Capital Markets Authority, monitor compliance with laws, enforce penalties for violations, and ensure adherence to tax, environmental, and employee rights regulations.
5. b) Difference between Holding Company and Subsidiary Company

A holding company is a corporation or entity that owns a controlling interest in one or more other companies, known as subsidiaries

 

A subsidiary company is a separate legal entity that is controlled by another company, known as the parent or holding company.

Difference between Holding Company and Subsidiary Company

Basis	Holding Company	Subsidiary Company
Ownership	A holding company is an entity that owns a significant portion of the shares or voting rights in other companies. It typically holds controlling interest (usually more than 50%) in its subsidiaries.	A subsidiary company is a separate legal entity that is controlled by another company, known as the parent or holding company. The parent company holds the majority of voting rights or shares in the subsidiary.
Control	A holding company exercises control over its subsidiaries through ownership of their voting stock or through contractual agreements.	Subsidiaries operate autonomously to some extent but are ultimately subject to the control and influence of the parent company.
Management	It may provide strategic direction and governance oversight but typically does not involve itself in the day-to-day management of its subsidiaries.	They have their own management teams and operational structures, but major decisions may require approval from the parent company.
Business Operations	Holding Companies do not engage in the operational activities of their subsidiaries. Instead, they primarily focus on holding and managing investments in other businesses.	Subsidiaries are independent legal entities that engage in operational activities within their respective industries. They may have their own products, services, customers, and revenue streams.
Financial Reports	Holding Companies typically consolidate the financial statements of their subsidiaries into their own financial reports. This consolidation provides a comprehensive view of the overall group’s financial performance.	Subsidiary Companies maintain their own financial records and produce separate financial statements. However, these financial statements may be consolidated into the financial reports of the parent company.
Liability	Holding Companies are generally not liable for the debts and obligations of their subsidiaries. Each subsidiary maintains its own legal and financial independence.	Subsidiaries have limited liability, meaning their obligations are generally separate from those of the parent company.

SAMPLE WORK

Complete copy of CPA COMPANY LAW REVISION KIT is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHER’S APP) and in HARD copy 

Phone: 0728 776 317

Email: [email protected]

QUESTION 7

August 2024 Question One A and B

(a)      With reference to companies, explain the term “body corporate”.         (2 marks)

(b) Pizza World Enterprises Ltd., is a small family-owned company operating a chain of restaurants. The company has of late been facing financial difficulties. One reason being that the company’s directors have been using the company’s funds for personal expenses. As a result, the company has not been honouring its obligations to its creditors. The creditors are now contemplating suing the company directors.

 

Required:

Discuss THREE possibilities of the court lifting the veil of incorporation when the case is brought in a court of competent jurisdiction.               (6 marks)

 

MASOMO MSINGI ANSWER

a) Explanation of the term “body corporate”

A body corporate is a legal term that refers to a company or corporation that has been legally formed. It is a separate legal entity from its owners (shareholders or members). This means that the company can sue and be sued in its own name, own property, enter into contracts, and incur debts independently of its owners.

b) Possibilities of the court lifting the veil of incorporation

The veil of incorporation is a legal principle that separates the company from its shareholders. However, there are circumstances where courts may “lift the veil” and hold the shareholders personally liable for the company’s debts. Here are three potential grounds that the creditors might argue in their case against Pizza World Enterprises Ltd.’s directors:

1. Fraudulent Trading: This occurs when a company carries on business with the intention of defrauding creditors. If the directors knowingly used company funds for personal expenses while the company was insolvent or knew it would become insolvent, this could be considered fraudulent trading. The directors could be held personally liable for the company’s debts.
2. Agency or Alter Ego Doctrine: This doctrine holds that if a corporation is so dominated by its shareholders that it has no separate existence, the corporation’s acts can be attributed to the shareholders. If the directors exercised such control over Pizza World Enterprises Ltd. that it was merely an instrumentality of their personal affairs, the court might pierce the corporate veil. This would make the directors personally liable for the company’s debts.
3. Group Enterprise: This concept recognizes that a group of companies may act as a single economic entity. If Pizza World Enterprises Ltd. is part of a larger group of companies, and the directors used company funds for the benefit of the group rather than the individual company, the court might pierce the veil. This would make the directors personally liable for the debts of the entire group.
4. Public Policy Considerations: Courts may also lift the veil of incorporation based on public policy considerations, especially when doing so serves justice and prevents abuse of corporate structures. If allowing directors to hide behind limited liability would result in unfairness to creditors or other stakeholders, courts may intervene. For example, if Pizza World Enterprises Ltd.’s financial difficulties stem from deliberate mismanagement by its directors while they continue to enjoy personal benefits at creditors’ expense, a court might decide that lifting the veil is necessary to protect those creditors and uphold public interest.

 

QUESTION 8

August 2024 Question Two A

Highlight THREE characteristics of a company limited by guarantee.          (3 marks)

 

MASOMO MSINGI ANSWER

Characteristics of a Company Limited by Guarantee

A company limited by guarantee is a type of company where its members are liable to contribute a specified sum to the company in the event of its winding up. This liability is limited to the amount guaranteed, and members are not personally liable for the company’s debts beyond this sum.

Here are some key characteristics of companies limited by guarantee:

1. Limited Liability: Members are only liable to contribute a predetermined amount to the company in case of its liquidation. This is a significant advantage compared to sole traders or partnerships, where members have unlimited liability.
2. No Share Capital: These companies do not have share capital. Instead, they rely on membership contributions to fund their operations.
3. Membership-Based: The company is owned and controlled by its members, who are typically individuals or organizations.
4. Not-for-Profit Nature: While they can generate revenue, companies limited by guarantee are generally not-for-profit organizations. Their primary purpose is to achieve a specific goal or objective, rather than to maximize profits.
5. Non-Distributable Profits: Any profits made by the company must be reinvested back into the business for the benefit of its members or for charitable purposes.
6. Regulatory Compliance: These companies are subject to specific regulations and reporting requirements.
7. Common Uses: Companies limited by guarantee are often used for charitable organizations, clubs, societies, and other non-profit entities.

 

QUESTION 9

April 2024 Question Three B

Distinguish between “Private Limited Company” and “Public Limited Company”. (4 marks)

 

MASOMO MSINGI ANSWER

Difference between Public Limited Company and Private Limited Company

	Public Limited company	Private Limited company
Membership	Minimum  of 7 and no maximum	Minimum of 1 and  maximum of 50
Prospectus	Can issue a prospectus	Cannot issue a prospectus
Director	At least 2 directors	At least 1 director
Transfer of shares	Shares are freely transferable	Restricts transfer of shares to members only
Commencement of business	Can only commence business after certificate of trading is issued	Can commence business after certificate of Incorporation is issued
Publication of accounts	Must publish its account	No requirement to publish accounts

 

QUESTION 10

December 2023 Question One A and B

a) Explain the concept of legal personality in the context of corporate entities. (4 marks)

 

MASOMO MSINGI ANSWER

Concept of legal personality in the context of corporate entities

In the context of corporate entities, legal personality refers to the recognition of a corporation as a separate and distinct entity from its owners, with the ability to hold property, enter into contracts, and sue or be sued in its own name. This concept is enshrined in the principle of “separate legal personality” or “corporate personality,” which is a fundamental characteristic of a corporation.

(b) Examine THREE classifications of companies on the basis of liability.   (6 marks)

 

MASOMO MSINGI ANSWER

Companies can be classified into three main categories based on the liability of their members (owners):

1. Companies Limited by Shares: In this type of companies, shareholders do not pay the entire value of their shares in one go. In these companies, the liabilities of members is limited to the extent of the amount not paid by them on their shares. This means that in case of winding up, members will be liable only until they pay the remaining amount of their shares.
2. Companies Limited by Guarantee: In these type companies, the memorandum of association mentions amounts of money that some members guarantee to pay. In case of winding up, they will be liable only to pay only the amount so guaranteed. The company or its creditors cannot compel them to pay any more money.
3. Unlimited Companies: Unlimited companies have no limits on their members’ liabilities. Hence, the company can use all personal assets of shareholders to meet its debts while winding up. Their liabilities will extend to the company’s entire debt.

 

QUESTION 11

August 2023 Question Six B

Discuss THREE advantages and THREE disadvantages of the principle of legal personality.  (12 marks)

 

MASOMO MSINGI ANSWER

The principle of legal personality is a legal concept that gives a company the same legal rights and duties as a human being. This means that a company can own property, enter into contracts, sue and be sued in its own name.

 

Advantages of the principle of legal personality:

1. Limited liability: Shareholders are not personally liable for the debts and liabilities of the company. This means that if the company goes bankrupt, the shareholders’ personal assets are protected.
2. Continuity of existence: A company is a separate legal entity from its owners and managers. This means that the company can continue to exist even if its owners or managers change.
3. Facilitation of business transactions: The principle of legal personality makes it easier for companies to enter into contracts and other business transactions. This is because companies are treated as separate legal entities, and their contracts and transactions are not binding on their owners or managers.

 Disadvantages of the principle of legal personality:

1. Abuse of corporate form: The principle of legal personality can be abused by companies to commit fraud or other wrongdoing. For example, a company may be used to hide assets from creditors or to avoid paying taxes.
2. Complexity: The principle of legal personality can create complexity in the legal system. This is because courts must determine whether a company is a separate legal entity in each case.
3. Cost: The principle of legal personality can be costly for companies to maintain. This is because companies must comply with a number of legal requirements, such as filing annual returns and holding shareholder meetings.

 

QUESTION 12

April 2023 Question One A (i)

A group of four graduates have decided to form a small business firm to deal in import and export trade. You have been appointed as a member of the technical committee to help in registering the firm as a limited liability company. Explain to the committee the matters below:

(i) The FIVE legal characteristics of the entity that will be registered.             (5 marks)

 

MASOMO MSINGI ANSWER

Legal characteristics of the entity that will be registered

1. Legal personality: As a limited liability company (LLC), the business will be recognized as a separate legal entity distinct from its owners. This means that the company can own assets, enter into contracts, and sue or be sued in its own name. The concept of legal personality was explained in the case of reference salomon vs salomon co lts 1897.
2. Limited liability: The liability of members of the limited liability company is limited up to the extent of any amount that remains unpaid on the shares that are taken by the members. Therefore where the member has fully paid for his shares he cannot be called upon to contribute to the debts of the company if the company is unable to pay its debts.
3. Ownership of the property: A registered company can acquire and own property under its registered name .Such property does not belong to the members or shareholders. This was explained in the case of Macaura vs Northern Assurance Co Ltd
4. Capacity to Contract: A registered company can enter into legally binding contracts with other parties in order to pursue its objectives.
5. Capacity to sue or be sued: a registered company can sue another party to protect its interest and can also be sued if it fails to fulfill its obligations.

 

 

Links Below have Company Law Revision Kit (CPA Past Past Papers With Answers) in Soft copies

Android App Link – Click to Download 

PC/ IOS / Tablet / Android – Click to Access

QUESTION 13

April 2023 Question One B and C

b) With respect to the nature and classification of companies, distinguish between a registered company and a:

(i) Statutory corporation.  (1 mark)

(ii) Partnership.     (4 marks)

c) Outline FIVE instances under common law where the veil of incorporation may be lifted. (5 marks)

 

MASOMO MSINGI ANSWER

b). Distinguish between a registered company and:-

i) Statutory Corporation

A statutory corporation is a type of company that is created by a specific statute or legislation enacted by the government. It is a separate legal entity established for a specific public or governmental purpose. Here are a few distinctions between a registered company and a statutory corporation:

1. Formation: A registered company is formed by individuals or entities coming together and registering the company under the relevant company laws. On the other hand, a statutory corporation is created through a special law or statute passed by the government, granting it legal existence and specific powers.
2. Ownership: In a registered company, the ownership typically rests with the shareholders who invest capital in the company and hold shares. In a statutory corporation, ownership is vested in the government or a public authority, and there are usually no shareholders.
3. Purpose: A registered company can engage in various commercial activities for profit, whereas a statutory corporation is typically established to fulfill specific public functions or provide essential services. For example, a statutory corporation may be responsible for managing public utilities, regulating certain industries, or providing public services like transportation or healthcare.
4. Governance: A registered company is governed by its own internal rules and regulations, such as articles of association and shareholder agreements. The management structure and decision-making processes are determined by the shareholders and directors. In contrast, a statutory corporation has a governing body appointed or nominated by the government or relevant authority. The governance structure is determined by the legislation that created the corporation.

 

ii) Partnership

A partnership is a business relationship between two or more individuals or entities who agree to carry on a business together and share its profits and losses. Here are four distinctions between a registered company and a partnership:

1. Legal Status: A registered company is a separate legal entity from its owners, while a partnership does not have a separate legal existence. Partnerships are considered an extension of the individuals or entities forming the partnership.
2. Liability: In a registered company, the liability of the shareholders or members is usually limited to their investment in the company, and their personal assets are protected. In a partnership, the partners have unlimited liability, meaning they are personally liable for the debts and obligations of the partnership. Their personal assets can be used to satisfy partnership liabilities.
3. Management and Decision-making: In a registered company, the management structure and decision-making processes are determined by the company’s articles of association and governed by directors and shareholders. In a partnership, the partners have equal rights in the management and decision-making of the business unless otherwise agreed. Partners generally have a say in the day-to-day operations and can participate in decision-making.
4. Transferability of Ownership: In a registered company, ownership is represented by shares, which can be bought, sold, or transferred freely, subject to any restrictions in the company’s articles of association. In a partnership, ownership interests are not represented by shares, and transferring ownership requires the consent of all partners unless otherwise specified in a partnership agreement.

 

c) Instances under common law where the veil of incorporation may be lifted

Under common law, there are several instances where the “veil of incorporation” may be lifted, which means that the courts disregard the separate legal personality of a company and hold its members or directors personally liable for the company’s actions or debts. Here are five instances where the veil of incorporation may be lifted:

1. Fraudulent or Improper Conduct: If a company is formed or used for fraudulent or improper purposes, the courts may disregard the separate legal personality and hold the individuals behind the company personally liable. This includes situations where the company is used to commit fraud, conceal illegal activities, or evade legal obligations.
2. Agency or Trust Relationship: When a company acts as an agent or trustee for its members or directors, and they misuse the company to benefit themselves at the expense of others, the courts may lift the veil of incorporation. This typically occurs when the company is used to defraud creditors or divert assets for personal gain.
3. Group of Companies: In certain cases involving a group of companies, the courts may lift the corporate veil to determine the true economic reality or to prevent an injustice. If companies within a group are operating as a single economic unit, and one company is being used to avoid legal obligations or unfairly deprive creditors, the courts may disregard the separate legal personality.
4. Avoidance of Legal Obligations: If a company is set up or structured with the intention of avoiding legal obligations, such as tax obligations or contractual obligations, the courts may lift the veil of incorporation. This occurs when the company is seen as a mere façade or sham created to circumvent the law.
5. Neglect of Statutory Requirements: If a company fails to comply with certain statutory requirements, such as maintaining proper accounting records, filing required documents, or acting in accordance with its constitutional documents, the courts may lift the corporate veil. This typically occurs when the company’s non-compliance is deemed to be a serious and deliberate disregard of legal obligations.

 

QUESTION 14

December 2022 Question One

(a) Highlight FIVE rules relating to the naming of companies.  (5 marks)

(b) Describe the effect of the principle elucidated by Lord MacNaghten in the case of Salomon-V-Salomon.    (7 marks)

(c) Explain the difference between a “company limited by shares” and a “company limited by guarantee.”        (4 marks)

(d) Identify FOUR features of an unlimited company. (4 marks)

SAMPLE WORK

Complete copy of CPA COMPANY LAW REVISION KIT is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHER’S APP) and in HARD copy 

Phone: 0728 776 317

Email: [email protected]

MASOMO MSINGI ANSWER

(a) Rules relating to the naming of companies

1. The name must not be too similar to that of an existing company.
2. The name must not in the opinion of the registrar be undesirable.
3. The name must not mislead the public in any manner.
4. The name must not suggest any patronage of the government, president, department or ministry.
5. The name must not support a criminal or immoral intent or purpose.
6. The name must contain the word Limited or Ltd as the last word thereof.
7. The name must not contain the term co-operative or its equivalent or any abbreviation thereof.
8. The name must not generally contain the terms “national” or “international.”
9. The name must not contain the terms “bank,” “insurance” or “hotel” unless the company proposes to carry on such business.
10. The name must not contain the surname of a person who is not named or proposed directory of the company.
11. The name must not contain the registered trademark of any person without his written consent.

 

(b) Effect of the principle elucidated by Lord MacNaghten in the case of Salomon-V-Salomon

The principle elucidated by Lord MacNaghten in the case of Salomon v Salomon is often referred to as the “corporate veil” or the “separate legal personality” of a corporation. This principle holds that a corporation is a separate legal entity from its owners, shareholders, and directors, and that it has the same legal rights and responsibilities as a natural person.

 

The effect of this principle is that:

1. Limited Liability: Members liability is limited by shares or guarantee. It means that the liability of a company’s shareholders is generally limited to the amount of capital they have invested in the company. This means that if a company incurs debts or is sued, the shareholders are not personally liable for those debts or claims, unless they have given personal guarantees.
2. Perpetual Succession: Since a registered company is a legal person not susceptible to natural shocks, it has capacity to exist in perpetuity as its life lies in the intendment of law i.e. Company can continue to exist indefinitely, even if its shareholders change or the company is sold to new owners. This allows companies to be used as a vehicle for long-term business ventures, as the company can outlast the involvement of any individual shareholders.
3. Owning of property: a registered company has capacity to own property in its own e.g. land. Such property is vested in the company (Macauras case). It has an insurable interest in it.
4. Sue or be sued: It has capacity to enforce its rights and may be sued on its obligations (Foss v Harbottle). It is Primafacie the proper plaintiff for redress. This allows third parties to have legal recourse against a company if they feel they have been wronged by the company’s actions, without having to pursue individual shareholders or directors.
5. Capacity to contract: a company has legal ability to enter into contractual relationships

  

(c) Difference between a “company limited by shares” and a “company limited by guarantee.”

A company limited by shares is a type of company that is owned by shareholders, who are the people who have bought shares in the company. The shareholders are liable for the company’s debts only to the extent

Links Below have Company Law Revision Kit (CPA Past Past Papers With Answers) in Soft copies

Android App Link – Click to Download 

PC/ IOS / Tablet / Android – Click to Access

 

Company Law Revision Kit Hard Copy (Printed and Bound)