Company law notes Revised and Updated notes

PAPER NO.7 COMPANY LAW

GENERAL OBJECTIVES

This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to apply and comply with the provisions of company law in relevant circumstances and environments.

LEARNING OUTCOMES

A candidate who passes this paper should be able to:

• Apply legal principles relating to formation of companies
• Evaluate the rights and obligations of members and shareholders
• Comply with the legal principles governing liquidation of corporates and restructuring
• Comply with the legal principles relating to companies incorporated outside Kenya
• Ensure books of account are prepared in compliance with the law.

SYLLABUS

 7.1 Nature and classification of companies

• Nature and characteristics of a company
• Types of companies
• Principle of legal personality and veil of incorporation
• Distinction between companies and other forms of business associations, sole proprietorships, partnerships and cooperative societies.

7.2 Formation of companies

• Promoters and pre-incorporation contracts
• Process of forming a company
• Memorandum and articles of association
• Certificate of incorporation
• Effects of incorporation

7.3 Membership of a company

• Acquisition of membership
• Register of members
• Rights and liabilities of members
• Cessation of membership

 7.4 Shares

• Classes of shares
• Variation of class rights
• Share certificates
• Issue and allotment
• Transfer and transmission
• Transfer of shares under central depository system
• Mortgaging and charging of shares

7.5 Share capital

• Meaning and types of share capital
• Raising of share capital
• Prospectus/information memorandum
• Maintenance of capital
• Alteration of capital
• Dividends

7.6 Debt capital

• Borrowing powers of a company
• Debentures
• Charges
• Registration of charges
• Remedies for debenture holders

7.7 Company meetings

• Nature and classification of company meetings
• Essentials of a valid meeting
• Voting
• Resolutions

7.8 Directors

• Qualifications, appointment and disqualification
• Powers and duties of directors
• Removal and vacation of office
• Register of directors
• Remuneration of directors
• Loans to directors
• Compensation for loss of office
• Disclosure of director’s interest in contracts
• The rule in Turquand’s case/Indoor Management rule
• Insider dealing

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7.9 The company secretary

• Qualification, appointment and removal
• Powers and duties of the company secretary
• Liability of the company secretary
• Register of secretaries

7.10 Auditors

• Qualification, appointment and removal
• Remuneration of auditors
• Powers and duties
• Rights and liabilities

7.11 Company accounts, audit and investigation

• Books of accounts
• Form and content of accounts
• Group accounts
• Director’s report
• Auditor’s report
• Annual returns
• Investigation of company affairs
• Appointment and powers of inspectors
• Inspector’s report

7.12 Corporate restructuring

• Need for restructuring
• Mergers,
• Post merger reorganisation
• Takeovers and acquisitions
• Schemes of arrangement and compromises
• Reconstruction

 7.13 Receivership and liquidation of companies

• Meaning of receivership
• Appointment and vacation of office
• Powers and duties of a receiver
• Termination of receivership
• Meaning of liquidation
• Types of liquidation
• Appointment, powers and duties of liquidators
• Discharge of liquidators
• Distribution of assets and dissolution of companies

7.14 Companies incorporated outside the country

• Process of registering a company
• Certificate of registration
• Power to hold land
• Registration of charges
• Accounts of foreign companies
• Service of process and notices on foreign companies
• Returns
• Penalties
• Cessation of business

 7.15 Emerging issues and trends

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