SCHOOL OF BUSINESS, ECONOMICS AND MANAGEMENT
BBA350-COMPANY LAW
MID SEMESTER EXAMINATIONS
TUESDAY, 2ND APRIL 2013
11:30 – 14:30 Hours
Time allowed: 3 Hours plus 10 Minutes reading time
TOTAL MARKS: 100
Instructions to candidates:
1. Check that you have the correct examination in front of you.
2. The paper are SIX (6) questions all carrying equal marks. You must answer
QUESTION ONE AND THREE (3) OTHER QUESTIONS
3. All questions must be answered on the answer sheet only.
4. Write down the number of questions that you have answered on the cover of the
examination sheet.
5. Begin each question on a new page.
6. All answers must be supported by appropriate authorities where relevant.
7. No other books, files or mechanical / electronic aids are permitted.
8. There shall be no form of communication between the students during the
examination. Any student caught doing this will be disqualified.
DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO
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Question One (1): compulsory
Mr Kent Building and Jones Tamanga have been friends for a while. Recently, the two
gentlemen opted to team up and form a partnership. The partnership name agreed on
was “Tamanga Building Contractors & Mechanics.” Upon setting up the business, the
partnership was advised to register the name with the Registrar of Business Names.
However, the partners did not find the time to attend to this. They immediately set up
and took up two contracts to construct office blocks for two limited companies. Because
the partnership was just starting out, the partners obtained a loan of Kr100, 000.00 from
the bank to enable them purchase mechanical equipment for the job. The equipment
was purchased from a competing limited company which, unknown to Jones Tamanga
was largely owned by Kent Building. Three months after the firm began construction of
the office blocks, one of the machines that were purchased by the firm broke down on
account of negligent handling by a firm worker. In the process of the breakdown, a
third party passer-by was injured by a piece of the machine that flew off to the main
road. The breakdown of the machine spelt trouble for the firm. They failed to complete
the construction of office blocks in time. As a result of this predicament, the partnership
has been sued by the two companies for breach of the contract to build office blocks as
agreed by the parties. The partnership has also been sued by the injured third party
who lost an eye after the breakdown of the firm equipment. Upon seeking advice, the
partnership has taken the view that since it was not registered, it was an illegal
partnership and should not be held liable under the building contracts. It had also not
taken responsibility for the wrongs of its employee whom it says must himself be sued
for his own wrong doing.
i. Advise the two companies of their rights in this matter. [10 Marks]
ii. You have also been approached by the injured passer-by. Please advise him on
his rights, if any. [10 Marks]
iii. Jones Tamanga has just discovered that his partner is a major shareholder in the
company that sold them the equipment and he is not pleased with this news.
Advise him on his rights or options too. [5 Marks]
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Total: 25 Marks
ANSWER ANY THREE (3) QUESTIONS FROM THE REMAINING
Question Two (2)
a. Give an account of why it is very important in any given scenario to ascertain
whether or not a partnership relationship between two or more persons exists.
10 Marks
b. It has often been argued by some scholars that though promoters are neither
agents nor trustees of the company they incorporate, they nonetheless have
duties quite similar to those of agents and trustees. They are thus said to be in a
fiduciary relationship with the company they incorporate.
i. What is your understanding of the expression fiduciary relationship?
5 Marks
ii. List and explain four (4) principle fiduciary duties that promoters have to
the company. 10 Marks
Total: 25 Marks
Question Three (3)
You have just been approached by Mr Jumpstart Engine-Yanoka, a partner in the firm of
Yanoka, Yalema & Associates. The partnership has been running for the last five years.
The partnership deed executed by the partners was for a period of four years that lapsed a
year ago. No fresh deed was executed but the partners continued to run their poultry
business to date. The firm has recently not done well as the cost of running the business is
enormous. As a matter of fact, it has in the last 6 months been running loses. Mr Engine-
Yanoka wants the partnership to dissolve, but is facing serious opposition from the other
partners who believe that if they can remain determined and soldier on for a few more
months, things might get better. He seeks from you advice on how a dissolution can be
achieved if at all. He also wants to know what ought to be done, if dissolution occurs, to
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ensure that the partnership completely ceases and all partners are separated. Kindly fully
advise Mr Engine-Yanoka.
25 Marks
Question Four (4)
Distinguish the following terms:
a) Partnership and company 5 Marks
b) Illegality ab initio and supervening illegality 5 Marks
c) Joint and several liability of partners 5 Marks
d) Surrender and forfeiture of shares 5 Marks
e) Partnership property and partnership shares 5 Marks
Total: 25 Marks
Question Five (5)
Answer the following as true or false.
a. Where a person has been admitted as a new partner in a firm, he is not required
to contribute to the capital of the firm so long as he has paid the old partners the
premium due to them for the goodwill he acquires. 5 Marks
b. The liability of a member in an unlimited company arises soon as the company
fails to pay its debts whilst it is still a going concern. 5 Marks
c. The sharing of net profits of a business is prima facie evidence of partnership in a
majority of cases but is not conclusive evidence of partnership. 5 Marks
d. The registrar of companies may, on application by the company, allow a private
company limited by shares to dispense with the use of the word “LTD”
5 Marks
e. A partner who retires from a firm and only gives notice of retirement by gazette
notice will not be liable for subsequent debts of the firm to persons other than
those he dealt with, but may remain liable on subsequent debts acquired by the
firm to those persons he dealt with whilst a partner of the firm. 5 Marks
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Total: 25 Marks
Question Six (6)
What is your understanding of the following?
a) Contract of novation 5 Marks
b) The doctrine of Estoppel 5 Marks
c) Limited liability by guarantee 5 Marks
d) Conversion by default 5 Marks
e) Lifting the veil of incorporation 5 Marks
Total: 25 Marks
END OF MIDSEMESTER EXAMINATION PAPER
