PART II
SECTION 3
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 the provisions of company law in the formation,
composition, operations and dissolution of a company
7.0 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 corporate insolvency and
restructuring
• Comply with the legal principles relating to companies incorporated outside
Kenya
• Ensure books of account are prepared in compliance with the law
CONTENT
7.1 Nature and classification of companies
- Types of companies
- Nature and characteristics of a company
- Classification of companies
- Principle of legal personality and veil of incorporation
- Distinction between companies and other forms of business associations
7.2 Formation of companies
- Promoters and pre-incorporation contracts
- Process of forming a company
- Memorandum and articles of association
- Certificate of incorporations
- Legal consequences 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 warrants and certificates
- Issue and allotment
- Transfer and transmission
- Mortgaging and charging of shares
7.5 Share capital
- Meaning and types of share capital
- Raising of share capital
- Prospectus/Information memorandum
- Maintenance and Alteration of capital
- The purchase by a company of its own shares
- Financial assistance by a company for purchase of its shares
- 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 meetings
- Proceedings at meetings
- Voting
- Resolutions
- Minutes
7.8 Directors
- Qualification and disqualification
- Appointment of directors
- Powers and duties of directors
- Removal and vacation of office
- Register 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
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 inspection
- Books of accounts
- Form and content of accounts
- Group accounts
- Director’s report
- Auditor’s report
- Investigation of company affairs
- Appointment and powers of inspectors
- Inspector’s report
- Annual returns
7.12 Corporate Restructuring
- Need for restructuring
- Mergers, Take-overs and Acquisition
- Post Merger Reorganisation
- Schemes of Arrangement and Compromises
- Reconstruction
7.13 Corporate insolvency
- Meaning of Insolvency
- Types of winding up
- Appointment, powers and duties of liquidators
- Release of liquidators
- Rights of parties in winding up
- Distribution of assets
- Offences relating to liquidation
7.14 Companies incorporated outside Kenya
- Process of registering a company in Kenya
- Certificate of registration
- Power to hold land
- Registration of charges
- Accounts of foreign companies
- Service of process and notices on foreign companies
- Returns
- Cessation of business
- Penalties
7.15 Emerging issues and trends
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