Category: A Company Law revision

Company Law questions and answers

Kazi Bure borrowed Shs.50,000 from Tumaini Bank and deposited his XYZ Supermarket Ltd,s share certificate with a blank transfer as a security. Subsequently he bought goods from the supermarket on credit. The goods were worth Shs.15,000. The articles of association of XYZ Supermarket Ltd claimed a first and paramount lien on its members shares on debts due to the supermarket. However, before the supermarket lien arose the bank gave the supermarket notice of Kazi Bure’s share certificate having been lodged with the bank as a security for the loan. Kazi Bure is unable to pay for the goods he obtained from the supermarket and has also defaulted on the loan. XYZ Supermarket Ltd wants to exercise its lien and the bank wants to exercise its equitable right to have the shares transferred to into its name. In this situation discuss the rights of i) The Bank ii) XYZ Supermarket Ltd

Kazi Bure borrowed Shs.50,000 from Tumaini Bank and deposited his XYZ Supermarket Ltd,s share certificate with a blank transfer as a security. Subsequently he bought goods from the supermarket on credit. The goods were worth Shs.15,000. The articles of association Open …

“The capital of may no doubt be diminished by the expenditure upon and reasonably incidental to all the objects specified. A part of it may be lost in carrying on the business operations authorized. Of this, all persons trusting the company are aware and take the risk. But creditors have the right to rely and were intended by the legislature to have the right to rely on the capital remaining undistributed by any expenditure outside these limits or by the return of nay of it to the shareholders”. Per Lord Herchell L.J. in Trevor v Whitworth (1837) 12 App. Cap 409 at 415. Discuss this statement outlining the circumstances and conditions under which companies may reduce their capital.

“The capital of may no doubt be diminished by the expenditure upon and reasonably incidental to all the objects specified. A part of it may be lost in carrying on the business operations authorized. Of this, all persons trusting the Open …

The shares of Promotion Limited, a private company are held by members of three families, that is, the family of Mr. Karanja, Mr. Mutisya and Mr. Otieno. Mr. Karanja and Mr. Mutisya hold 90% of the company‟s shares. However, they feel that, the company is in need of further capital but due to the squabbles among the families, Mr. Otieno is not willing to inject additional funds so long as Mr. Karanja still holds any shares in the company. Further, Mr. Karanja and Mr. Mutisya have reasonable cause to believe and do in fact believe that the family of Mr. Otiengo is running their own business which is competing with that of Promotion Limited. It is known as a fact that Mr. Otieno is obtaining information as a member of Promotion Limited, which he is using to the benefit of his competing business. To resolve the problems, Mr. Karanja and Mr. Mutisya propose to alter the company‟s articles of association by adding two new articles. The first article will enable the shareholders of 90% of the company‟s shares to compulsorily acquire the shares of the minority shareholder. The second one will require any shareholder who carries on competing business with company‟s business to transfer his shares to the nominee of the directors. Required: i) State the restrictions imposed both by common law and statute law upon a company’s power to alter its articles of association ii) Discuss the validity of the proposed alteration

The shares of Promotion Limited, a private company are held by members of three families, that is, the family of Mr. Karanja, Mr. Mutisya and Mr. Otieno. Mr. Karanja and Mr. Mutisya hold 90% of the company‟s shares. However, they Open …