Company Law Exam with Answers

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QUESTION 1 a. Define a promoter of a company. Explain and illustrate with decided cases his legal position in relation to a company. Though the certificate of incorporation is conclusive for purposes of incorporation, using decided cases, outline circumstances under which it could be withdrawn.(10marks) ANSWER Definition; A promoter is one who undertakes to form a company with reference to a given project and to set it going and who takes the necessary step to accomplish that purpose - A promoter is not an agent of the company he promotes, as it does not exist yet. At common law, he cannot be an agent of a non-existent principle. - A promoter is not a trustee of the company in formation as it does not exist yet. - The English courts have…show more content…
When the charge chrysalises it fixes on the assets then owned by the company, catching any assets acquired up to that date, but missing any which have already been disposed of. Explain the similarities and differences between shares and debentures. (7marks) i. Similarities - A debenture is usually one of a series or class, which is similar to a class of shares. - Debentures, as well, as shares are long term investments in the company and re transferable in the same manner. - Debentures and shares may be issued in the same way through a prospectus issue ii. Differences - A shareholder is a member whereas a debenture holder is a creditor - A shareholder has an interest in the company but not in the company’s property. A debenture holder has no interest in the company but has an interest in the company’s property, which constitutes his security. - A shareholder can attend a meeting of the company and vote at the meeting whereas a debenture holder cannot - A shareholder cannot insure the company’s property where as a debenture holder can. - Interest on debenture must be paid even if the company doesn’t not make a profit and can, therefore, be paid out of capital. Dividends on share are payable only if profits are made and cannot be paid out of capital. - A company can purchase its own debentures but cannot, as a general rule, purchase its own shares. - As a general rule, share cannot be issued at a discount, where as debentures may be issued at a discount.

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