Share capital
QUESTION 1
April 2024 Question One A
(i) Explain the meaning of “consolidation of a company’s share capital”. (2 marks)
(ii) Outline SIX reasons why a company might opt to consolidate its share capital.
(6 marks)
QUESTION 2
December 2023 Question Two D
(i) Explain the term “bonus shares”. (2 marks)
(ii) Explain THREE reasons why a company may issue bonus shares to its shareholders.
(6 marks)
QUESTION 3
December 2023 Question Six C
Explain FOUR ways through which a company limited by shares or guarantee may if authorised by its articles, alter its share capital. (8 marks)
QUESTION 4
August 2023 Question Two D
Describe THREE types of company prospectuses. (6 marks)
QUESTION 5
August 2023 Question Four C
Evaluate FOUR ways in which a company can reorganise its share capital. (8 marks)
QUESTION 6
April 2023 Question Five C
Highlight the particulars contained in a company prospectus.
(8 marks)
QUESTION 7
December 2022 Question Three C
Brian is a preference shareholder in Duniani Company limited. He is entitled to a dividend of 11%. The company has however been suffering losses and has passed a resolution in a general meeting to reduce the dividends on preference shares to 7%.
Advise Brian on:
(i) His rights as a preference shareholder. (6 marks)
(ii) Whether the company can vary the dividends he may be given. (4 marks)
QUESTION 8
August 2022 Question Three B
In the context of share capital:
(i) Explain three ways in which a company might raise share capital. (6 marks)
(ii) Outline four circumstances when shares might be issued at a discount. (4 marks)
QUESTION 9
August 2022 Question Four B
Explain six rules governing shares and share capital of a company. (6 marks)
QUESTION 10
August 2022 Question Four C
Describe the following types of share capital:
(i) Authorised share capital. (2 marks)
(ii) Called-up share capital. (2 marks)
(iii) Fixed and circulating share capital. (2 marks)
QUESTION 11
April 2022 Question Two C
Highlight six rules governing payment of dividends. (6 marks)
QUESTION 12
December 2021 Question Six C
A company shall not apply any of its shares or capital money either directly or indirectly in payment of any commission, discount or allowance to any person.
With reference to the above statement, explain four circumstances when a company may pay a commission to a person from capital. (8 marks)
QUESTION 13
September 2021 Question Three B
Summarise ten rules governing declaration and payment of dividends that might be provided for in the company’s articles of association. (10 marks)
QUESTION 14
September 2021 Question Five C
In relation to share capital:
(i) Explain three exceptions to the rule that a company might not purchase its own shares.
(6 marks)
(ii) Highlight three circumstances under which a company might give financial assistance for purchase of, or subscription for, its shares. (6 marks)
QUESTION 15
May 2021 Question Six A and B
(a) Enumerate six most common reasons why companies might want to reduce their capital. (6 marks)
(b) In the context of company dividends:
(i) Explain the meaning of the phrase “cutting a melon”. (2 marks)
(ii) State three reasons why a limited company might suspend issuing dividends.
(6 marks)
QUESTION 16
November 2020 Question one B
Summarize five ways in which a company might alter its share capital. (10 marks)
QUESTION 17
November 2019 Question five A
Highlight three ways in which a company might raise share capital. (6 marks)
QUESTION 18
November 2019 Question five B
Summarise four types of share capital. (8 marks)
QUESTION 19
May 2019 Question one A
The shares of United Limited, a private company are held by Jane, John and Alex. Jane and John hold 90% of the company’s shares. However, they feel that the company is in need of further capital but due to squabbles, they are not willing to inject additional funds as long as Alex still holds some shares in the company. Further, Jane and John believe that Alex has another business which is competing with that of United Limited. To resolve the problems, Jane and John propose to alter the company’s articles of association by adding two new articles.
The first article will enable the shareholders of 90% of the company’s shares to compulsorily acquire the shares of the minority shareholder. The second article will require any shareholder who carries on competing business with the company’s business to transfer his shares to the nominee of the directors.
Alex is aggrieved by the proposed alterations and comes to you for advice.
Required:
Advise Alex on the validity of the proposed alterations to the articles. (10 marks)
QUESTION 20
May 2019 Question one B
In relation to share capital:
(i) State four exceptions to the rule that a company should not issue shares at a discount.
(4 marks)
(ii) Explain three roles of the court in the reduction of a company’s capital. (6 marks)
QUESTION 21
November 2018 Question five B
Mbegu Nzuri Ltd. is in the business of importing seeds. The company is about to make a new issue of 800,000 shares of Sh.20 each. The prospectus has stated that the seeds produced by the company yield 20 bags per acre “even on arid land” and that the company was the only one with such kind of seeds. There was also a publication in the local newspaper about the shares.
Additional information:
1. Saulo Mpoa did not read the prospectus but applied for the company’s shares and was allocated 4,000 shares at Sh.40 per share.
2. Baraka Mwanzi read the prospectus and was not allocated the company’s shares. She bought 6,000 of the company’s shares at the securities exchange at Sh.50 per share.
3. Sadiki MuKva read the publication in the local newspaper about the company’s shares and bought 10,000 shares at the securities exchange at Sh.55 per share.
4. An actual analysis of the seeds was done and it was discovered that the seeds were not as productive, only yielding 5 bags per acre and could only thrive in wet land. The shares of Mbegu Nzuri Ltd. thereafter dropped in value to Sh.5 per share.
With reference to the above scenario:
(i) Explain three types of misrepresentation. (3 marks)
(ii) Explain five elements of misrepresentation. (5 marks)
(iii) Advise Saulo, Baraka and Sadiki on possible action against the company.
(6 marks)
QUESTION 22
May 2018 Question one B
Ben Sikujua, a sole trader carrying on a business in the printing industry has asked Milele Bank Limited to advance him Sh.500,000 as additional working capital. The bank is prepared to advance the money on condition that Ben Sikujua offers a security. Ben Sikujua has a share certificate for 5,000 shares issued by Jewel Company Limited. Ben Sikujua wants to know whether he can use the shares whose value is Sh.650,000 as a security for the loan, lie further seeks to know whether he would still receive dividends even after he has charged the shares to the Bank.
Advise Ben Sikujua. (10 marks)
QUESTION 23
May 2017 Question six B
Assume that you are the Management Accountant reporting to the Finance Director of a public limited company. The Finance Director recently undertook a financial review as part of the company’s strategic review process. In his report, he observed that the company has more funds than are necessary to support its planned growth and that the company’s capital should be reduced.
You are required to write a report outlining four methods which might be adopted to reduce the capital of the company. (10 marks)
QUESTION 24
November 2016 Question one C
Greenpark Limited issued a prospectus inviting members of the public to subscribe for its shares. It was stated in the prospectus that the money was required for the purchase of modern equipment to be used for expansion of the company’s business. On the strength of this statement, Rose Sagina purchased shares of the company but she has since learnt that all the money received was used to repay the debts of the company which were long overdue. Rose Sagina feels shortchanged and seeks your legal advice.
Analyse the legal principles applicable in the above case and advise Rose Sagina appropriately. (10 marks)
QUESTION 25
May 2016 Question two A
Discuss five ways through which a company might raise share capital from the public
(10 marks)
QUESTION 26
September 2015 Question one B
Outline the contents of a prospectus issued in Kenya by a foreign company. (6 marks)
QUESTION 27
September 2015 Question four B
Explain four acts or omissions which might give rise to criminal liability in respect of a prospectus. (8 marks)
QUESTION 28
September 2015 Question four C
Outline three conditions to be fulfilled before the court can approve a reduction of capital of a company. (6 marks)
