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THE PUBLIC ACCOUNTANTS EXAMINATIONS BOARD
A Committee of the Council of ICPAU
CPA(U) EXAMINATIONS
LEVEL ONE
BUSINESS LAW – PAPER 3
FRIDAY, 28 AUGUST 2015
INSTRUCTIONS TO CANDIDATES
1. Time allowed: 3 hours 15 minutes.
The first 15 minutes of this examination have been designated for reading
time. You may not start to write your answer during this time.
2. This examination contains Sections A, B and C.
3. Section A is bound separately from Sections B and C.
4. Attempt all the 20 multiple-choice questions in Section A. Each question
carries 1 mark.
5. Attempt two of the three questions in Section B. Each question carries
20 marks.
6. Attempt two of the three questions in Section C. Each question carries
20 marks.
7. Write your answer to each question on a fresh page in your answer
booklet.
8. Please, read further instructions on the answer booklet, before attempting
any question.
© 2015 Public Accountants Examinations Board
Business Law – Paper 3
28 August 2015 Page 2 of 4
SECTION B
Attempt two of the three questions in this section
Question 2
Lufere Ltd was incorporated in 2008. The company deals in sale of cosmetics for
ladies. It is located at Ghetto hill, a Kampala suburb. The company’s directors
are; Zinda, Bala and Fude. They do not own shares in the company.
The company has been facing hard times for the last two years. There was
hardly any business carried out last year yet the company has many pending
debts.
A series of disagreements have occurred among the directors concerning
management of company affairs. For instance, Zinda and Fude have of recent
contested the transfer by Bala, of one of the company’s plots of land to one of
the creditors who is a relative of his wife.
At the same time, many other creditors have been demanding for payment in
vain. The creditors are also threatening to petition courts of law for winding up
of Lufere Ltd. Zinda and Fude are afraid that company property will soon be
attached.
Due to continuous challenges, company members except Bala’s wife have
resigned from the company. The registrar of companies has been duly notified.
Required:
(a) Raise and resolve the issues at Lufere Ltd.
(12 marks)
(b) Explain the procedure and benefits of voluntary winding up to the directors
of Lufere Ltd.
(8 marks)
(Total 20 marks)
Question 3
Peter Kiyenje and John Kiku started operating a hardware shop in Kabusu,
Rubaga division, Kampala, in 2007. Peter Kiyenje is managing the business while
John Kiku is an employee of the Ministry of Gender and Cultural Development.
Peter Kiyenje contributed Shs 10 million and John Kiku Shs 8 million to the
business. The building in which the hardware shop is operated belongs to John
Kiku and a monthly rent of Shs 250,000 is paid to him.
Peter Kiyenje and John Kiku agreed to share the profits in the business equally.
For the first five years, the hardware business realised a lot of profits. They
Business Law – Paper 3
28 August 2015 Page 3 of 4
reinvested some of the profits to expand their business, built a warehouse and
shared the remaining profits.
In the next three years, business went down. Peter Kiyenje was not declaring full
proceeds from the partnership businesses and was not allowing John Kiku to
access business records. He also clandestinely opened a hardware shop in the
neighborhood.
The relationship between Peter Kiyenje and John Kiku has become unbearable
and they are no longer talking to each other. John Kiku feels betrayed and he
has come to you for advice.
Required:
Identify the issues arising from the facts and resolve them.
(20 marks)
Question 4
Pio was a shareholder of YY Ltd which was a duly registered company limited by
shares and James Wanga as a director. The articles of association of the
company provided among others that ‘transfer of shares shall be restricted to the
existing company share holders, subject to the discretion of the directors, which
discretion shall not unreasonably be withheld’. Pio was an active member of the
company holding ten shares in the company. However, due to financial
constraints, he sold all his shares to his son Odono who is also a shareholder of
the company.
When Odono presented the share transfer duly signed by his father, Pio, James
Wanga declined to effect the transfer. He instead immediately wrote to Odono
informing him that his application had been rejected and he copied the letter to
Pio. It transpired that James Wanga had given the company office clerk a 10
million cheque to deliver to Pio but Pio rejected it. James Wanga had prior to
drawing the cheque cancelled the name of Pio from the register and inserted the
name of his wife, Melle Wanga.
Upon learning the conduct of James Wanga, Odono started investigating all his
acts and omissions before and after he became director. The investigation
revealed among others that Wanga presented his age at the time of appointment
as a director as 23 years when actually he was 17 at the material time.
James Wanga the previous year had legally dismissed Makofi the former
company records clerk and declined to pay him his four months’ salary arrears.
Makofi has got nothing from the company from the time he was dismissed to
date, and he hangs around the company premises soliciting money for survival.
Business Law – Paper 3
28 August 2015 Page 4 of 4
The aggrieved parties have come to you for advice on how the injustice in the
company may be addressed.
Required:
Raise and resolve all the issues arising from the facts.
(20 marks)
SECTION C
Attempt two of the three questions in this section
Question 5
(a) Explain the following.
(i) Simple contracts (4 marks)
(ii) Contract of record (4 marks)
(iii) Contracts under deed (4 marks)
(iv) A condition (4 marks)
(v) A warranty. (4 marks)
(Total 20 marks)
Question 6
(a) Briefly explain the circumstances under which the directors of a company
may refuse to register a transfer of shares of a public company.
(10 marks)
(b) Outline the procedure through which a company can reduce its capital.
(10 marks)
(Total 20 marks)
Question 7
(a) Distinguish between criminal law and civil law.
(14 marks)
(b) Differentiate between legal wrongs and moral wrongs.
(6 marks)
(Total 20 marks)
http://www.accountingpdfbooks.com
THE PUBLIC ACCOUNTANTS EXAMINATIONS BOARD
A Committee of the Council of ICPAU
CPA(U) EXAMINATIONS
LEVEL ONE
BUSINESS LAW – PAPER 3
FRIDAY, 28 AUGUST 2015
INSTRUCTIONS TO CANDIDATES
1. Time allowed: 3 hours 15 minutes.
The first 15 minutes of this examination have been designated for reading
time. You may not start to write your answer during this time.
2. This examination contains Sections A, B and C.
3. Section A is bound separately from Sections B and C.
4. Attempt all the 20 multiple-choice questions in Section A. Each question
carries 1 mark.
5. Attempt two of the three questions in Section B. Each question carries
20 marks.
6. Attempt two of the three questions in Section C. Each question carries
20 marks.
7. Write your answer to each question on a fresh page in your answer
booklet.
8. Please, read further instructions on the answer booklet, before attempting
any question.
© 2015 Public Accountants Examinations Board
Business Law – Paper 3
28 August 2015 Page 2 of 4
SECTION B
Attempt two of the three questions in this section
Question 2
Lufere Ltd was incorporated in 2008. The company deals in sale of cosmetics for
ladies. It is located at Ghetto hill, a Kampala suburb. The company’s directors
are; Zinda, Bala and Fude. They do not own shares in the company.
The company has been facing hard times for the last two years. There was
hardly any business carried out last year yet the company has many pending
debts.
A series of disagreements have occurred among the directors concerning
management of company affairs. For instance, Zinda and Fude have of recent
contested the transfer by Bala, of one of the company’s plots of land to one of
the creditors who is a relative of his wife.
At the same time, many other creditors have been demanding for payment in
vain. The creditors are also threatening to petition courts of law for winding up
of Lufere Ltd. Zinda and Fude are afraid that company property will soon be
attached.
Due to continuous challenges, company members except Bala’s wife have
resigned from the company. The registrar of companies has been duly notified.
Required:
(a) Raise and resolve the issues at Lufere Ltd.
(12 marks)
(b) Explain the procedure and benefits of voluntary winding up to the directors
of Lufere Ltd.
(8 marks)
(Total 20 marks)
Question 3
Peter Kiyenje and John Kiku started operating a hardware shop in Kabusu,
Rubaga division, Kampala, in 2007. Peter Kiyenje is managing the business while
John Kiku is an employee of the Ministry of Gender and Cultural Development.
Peter Kiyenje contributed Shs 10 million and John Kiku Shs 8 million to the
business. The building in which the hardware shop is operated belongs to John
Kiku and a monthly rent of Shs 250,000 is paid to him.
Peter Kiyenje and John Kiku agreed to share the profits in the business equally.
For the first five years, the hardware business realised a lot of profits. They
Business Law – Paper 3
28 August 2015 Page 3 of 4
reinvested some of the profits to expand their business, built a warehouse and
shared the remaining profits.
In the next three years, business went down. Peter Kiyenje was not declaring full
proceeds from the partnership businesses and was not allowing John Kiku to
access business records. He also clandestinely opened a hardware shop in the
neighborhood.
The relationship between Peter Kiyenje and John Kiku has become unbearable
and they are no longer talking to each other. John Kiku feels betrayed and he
has come to you for advice.
Required:
Identify the issues arising from the facts and resolve them.
(20 marks)
Question 4
Pio was a shareholder of YY Ltd which was a duly registered company limited by
shares and James Wanga as a director. The articles of association of the
company provided among others that ‘transfer of shares shall be restricted to the
existing company share holders, subject to the discretion of the directors, which
discretion shall not unreasonably be withheld’. Pio was an active member of the
company holding ten shares in the company. However, due to financial
constraints, he sold all his shares to his son Odono who is also a shareholder of
the company.
When Odono presented the share transfer duly signed by his father, Pio, James
Wanga declined to effect the transfer. He instead immediately wrote to Odono
informing him that his application had been rejected and he copied the letter to
Pio. It transpired that James Wanga had given the company office clerk a 10
million cheque to deliver to Pio but Pio rejected it. James Wanga had prior to
drawing the cheque cancelled the name of Pio from the register and inserted the
name of his wife, Melle Wanga.
Upon learning the conduct of James Wanga, Odono started investigating all his
acts and omissions before and after he became director. The investigation
revealed among others that Wanga presented his age at the time of appointment
as a director as 23 years when actually he was 17 at the material time.
James Wanga the previous year had legally dismissed Makofi the former
company records clerk and declined to pay him his four months’ salary arrears.
Makofi has got nothing from the company from the time he was dismissed to
date, and he hangs around the company premises soliciting money for survival.
Business Law – Paper 3
28 August 2015 Page 4 of 4
The aggrieved parties have come to you for advice on how the injustice in the
company may be addressed.
Required:
Raise and resolve all the issues arising from the facts.
(20 marks)
SECTION C
Attempt two of the three questions in this section
Question 5
(a) Explain the following.
(i) Simple contracts (4 marks)
(ii) Contract of record (4 marks)
(iii) Contracts under deed (4 marks)
(iv) A condition (4 marks)
(v) A warranty. (4 marks)
(Total 20 marks)
Question 6
(a) Briefly explain the circumstances under which the directors of a company
may refuse to register a transfer of shares of a public company.
(10 marks)
(b) Outline the procedure through which a company can reduce its capital.
(10 marks)
(Total 20 marks)
Question 7
(a) Distinguish between criminal law and civil law.
(14 marks)
(b) Differentiate between legal wrongs and moral wrongs.
(6 marks)
(Total 20 marks)
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