TC12 Q JUNE 12

1. EXAMINATION NO.__________________
THE PUBLIC ACCOUNTANTS EXAMINATION
COUNCIL OF MALAWI
2012 EXAMINATIONS
ACCOUNTING TECHNICIAN PROGRAMME
PAPER TC12: COMPANY LAW
MONDAY 4 JUNE 2012 TIME ALLOWED: 3 HOURS
2.00 PM - 5.00 PM
INSTRUCTIONS: -
1. You are allowed 15 minutes reading time before the examination begins during which
you should read the question paper and, if you wish, make annotations on the question
paper. However, you are not allowed, under any circumstances, to open the answer book
and start writing or use your calculator during this reading time.
2. Number of questions on paper - 8.
3. FIVE questions ONLY to be answered.
4. Each question carries 20 marks.
5. Your answers must be supported, where appropriate, by relevant decided cases and
statutory provisions.
6. Begin each answer on a fresh page.
7. DO NOT OPEN THIS PAPER UNTIL YOU ARE INSTRUCTED BY THE
INVIGILATOR.
This question paper contains 3 pages.
This question paper must not be removed from the examination hall.

2. 1
1. (a) Discuss the legal principle expounded in the classic case of Salomon v Salomon
(1897) A.C.22. 4 Marks
(b) Explain the meaning of “lifting the veil of incorporation”. 4 Marks
(c) State any three ways of lifting the veil of incorporation under:
(i) Statutory law. 6 Marks
(ii) The common law. 6 Marks
(TOTAL: 20 MARKS)
2. (a) State four ways in which a company’s share capital may be altered. 8 Marks
(b) Mention three principal rights that a shareholder has in a company. 6 Marks
(c) State the principal duty of a shareholder in a company. 2 Marks
(b) Mention two main preferential rights which accrue to holders of preference shares
in a company. 4 Marks
(TOTAL : 20 MARKS)
3. (a) Tinkhani is a shareholder in United Paints Limited. He wants to raise funds to
start up a business in town.
Required:
Mention two options available to Tinkhani to raise the funds that he needs using
his shares in United Paints Limited. 4 Marks
(b) Describe three ways in which debentures issued by a company may be secured.
6 Marks
(c) John holds debentures in Superior Garments Limited. The company has defaulted
on its obligations under the debenture. John wants to have his money paid by
Superior Garments Limited.
Required:
Mention four possible remedies that may be available to John. 10 Marks
(TOTAL: 20 MARKS)
Continued/……

3. 2
4. (a) Without outlining its exceptions, state the fact and rule in the case of Foss v
Harbottle. 8 Marks
(b) Last month, Richard received an envelope from Kaso Timber Limited of which he
was a minority shareholder. In it was a letter from the Managing Director of the
said Kaso Timbers Limited stating that in exercise of his powers of managing the
affairs of the company and upon consultation with the rest of the shareholders, he
had considered it appropriate to decide to compulsorily acquire all the shares held
by Richard.
Richard was disturbed by the news. He had not given his consent to the
compulsory acquisition of his shares as required by the articles of association and
in any case he would not want to cease to be a shareholder of Kaso Timbers
Limited.
Required:
Advise Richard on what to do, giving the grounds for his action and the expected
results thereof. 12 Marks
(TOTAL: 20 MARKS)
5. (a) (i) Who is a director? 3 Marks
(ii) What is the statutory minimum number of directors in a company?
2 Marks
(iii) State the penalty stipulated for carrying on a business with less than the
statutory minimum number of directors. 5 Marks
(b) Mention four types of persons disqualified from being director. 4 Marks
(c) Continental Hotels Limited has just discovered that Mr Moyo, one of its directors,
has appropriated a substantial amount of company funds for own use. The
company now wants to remove Mr Moyo as director.
Required:
Advise the company on the procedure to follow. 6 Marks
(TOTAL: 20 MARKS)
6. (a) Mention any five grounds on which a court may order the winding up of a
company. 5 Marks
(b) Mention the persons who may petition a court to wind up a company. 5 Marks
(c) Describe the manner in which an auditor must conduct himself/herself whilst
acting in performance of his/her duty. 4 Marks
(d) Outline three powers or rights of auditors towards a company. 6 Marks
TOTAL: 20 MARKS)
Continued/……

4. 3
7. (a) Who may convene an extraordinary general meeting by requisition? 3 Marks
(b) Mention the persons who are entitled to receive notices of general meetings of a
company. 4 Marks
(c) State the notice period for the following meetings:
(i) An annual general meeting. 1 Mark
(ii) Any meeting, other than an annual general meeting, for the passing of a
special resolution. 1 Mark
(d) Mention the four persons that are entitled to attend and to speak at any general
meeting of a company. 4 Marks
(e) Mention the legal requirements for a valid special resolution of a general meeting.
4 Marks
(f) Mention the rights of a member’s proxy at a general meeting. 3 Marks
(TOTAL: 20 MARKS)
8. (a) (i) State the circumstances under which a company may be wound up
voluntarily. 3 Marks
(ii) What is the procedure to be followed upon the passing of a resolution for
voluntary winding up a company? 3 Marks
(iii) At what time is a voluntary winding up of a company deemed to
commence? 2 Marks
(b) State the effect of the commencement of voluntary winding of a company.
4 Marks
(c) Due to stiff competition and other factors, Chitsanzo General Contractors Limited
was forced to wind up voluntarily. One of the requirements for voluntary winding
up of a company is that directors of the company should make declaration to the
effect that they have made full enquiry into the affairs of the company and have
formed the opinion that the company will be able to pay its debts in full. To the
declaration must be attached a statement of affairs of the company.
Required:
(i) What should the statement of affairs show? 3 Marks
(ii) State three factors that will give effect to the declaration. 5 Marks
(TOTAL: 20 MARKS)
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