INSTITUTE OF CHARTERED SECRETARIES I C S A

AND ADMINISTRATORS IN ZIMBABWE INTERNATIONAL

EXAMINATION QUESTION PAPER

SUBJECT: CORPORATE LAW

PART: C (PROFESSIONAL PROGRAMME I)

DATE: NOVEMBER 2016 TIME: 13:15 to 16:30 HOURS

DURATION: 3 hours and 15 minutes reading time

INSTRUCTIONS TO CANDIDATES
Answer any FIVE (5) questions.

MARK ALLOCATION
Each question carries 20 marks.

Total marks = 100 marks

Your examination script is the property of ICSAZ and is not to be removed from the examination
venue.
QUESTION 1

(a) The board of directors of Rush Limited convened an extraordinary

meeting of shareholders of Rush Limited to be held on 16 December
2016. On the 9th of December 2016, Mrs. Mavhunga, a shareholder of
Rush Limited was given a notice to attend the said meeting set down
on the 16th of December 2016 at 10.00 in the boardroom of Rush
Limited. The agenda of the meeting simply stated that the purpose of
the meeting was to discuss Rush’s business.

REQUIRED:
Critically evaluate whether Mrs. Mavhunga was given proper notice. (5 marks)

(b) The notice sent to shareholders provided that should shareholders

wish to exercise the right to appoint a proxy, they may appoint one
from the list provided by the company.

REQUIRED:
Discuss Mrs. Mavhunga’s legal position if she wishes to appoint a
person who is not a shareholder as her proxy. (5 marks)
(c) Mr. Motsi, a director of Rush Limited has died. The shareholders want
to know the options available to replace Mr. Motsi. Analyze the
available options.
(4 marks)
(d) Rush Limited will soon hold its Annual General Meeting. Discuss the
matters that must be deliberated at this meeting.
(6 marks)
[Total: 20 marks]

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Corporate Law: November 2016 Page 2 of 5
QUESTION 2

(a) Mr. Eliah, the Company Secretary of Zvipani Limited, fraudulently

ordered office furniture from a supplier stating that they were
needed by the company for business purposes. In fact he had the
furniture delivered to his own home and sold it for personal gain.

The company knew nothing about these transactions and now

denies liability in terms of the contract concluded on its behalf by
Mr. Eliah.

REQUIRED:
Critically discuss whether the supplier can hold the company liable in
terms of the contract. (10 marks)

(b) WDC Bank limited lent money to Tight Limited on a security of a

bond signed by two directors under the company’s common seal as
required by its Articles of Association. The Articles of Association
also required the company to pass an ordinary resolution before
such borrowings could be authorized. No such resolution was
passed.

REQUIRED:
(i) Assess whether the bond is binding on Tight limited. (5 marks)
(ii) What are the exceptions to the reasoning you gave in (i)
above? (5 marks)
[Total: 20 marks]

QUESTION 3

(a) Briefly discuss the procedure to be followed by a company to enter

into an arrangement or compromise with its creditors. (8 marks)

(b) A Court has given judgement of US$10 000 against Broke Nhamo in
favour of Shark Moyo. Upon the demand by the Sheriff whose duty is
to execute the judgement, Broke fails to satisfy it and also fails to
indicate to the Sheriff, disposable property sufficient to satisfy it. The
return made by the Sheriff states that he has not found sufficient
disposable property to satisfy the judgement.

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Corporate Law: November 2016 Page 3 of 5
 REQUIRED:
Assess the implications of the aforementioned facts. (6 marks)

(c) Briefly analyse seven instances when a company may be wound-up by

the Court. (6 marks)
[Total: 20 marks]

QUESTION 4

The nine (9) directors of Notsofast (Pvt) Ltd convened a board meeting
and among other issues resolved to assist the Chairman of the Board who
was in financial problems. They passed resolutions which authorized the
following:
1. That all payments to the Chairman as a director to the end of the year
be tax free.
2. That the company guarantees a loan for $50 000 that Super Bank, the
bankers of the Chairman, propose to advance to him, should he find
security in the form of a corporate guarantee.
3. 10 000 shares to be issued and sold to the Chairman at a discount to
enable him to market them.

REQUIRED:
a) Articulate the principles that motivate the rules of law relevant in this
scenario in so far as the duties of directors towards the company are
concerned. (6 marks)
b) Critically evaluate each of the above resolutions of the full board of
Notsofast (Pvt) Ltd namely on:
(i) Tax free payments. (5 marks)
(ii) Loans and guarantees. (6 marks)
(iii) Issue of shares at a discount. (3 marks)
[Total: 20 marks]

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Corporate Law: November 2016 Page 4 of 5
QUESTION 5

Wrongturn Investments Limited, a company listed on the Zimbabwe Stock

Exchange (ZSE), received a report from ZSE that the auditor appointed at
its last recent Annual General Meeting is not eligible for appointment as
an auditor of the company. The auditor is a director of one of the
subsidiaries of Wrongturn Investments Limited.

REQUIRED:
Present a report to the Board of Directors of Wrongturn Investments
Limited addressing the issues of the powers of the Zimbabwe Stock
Exchange in the affairs of the company, the legitimacy of the concerns of
the ZSE in this instance and steps to be taken should it be necessary to
appoint a new auditor.

Note: Regard will be given to both the format and content of the report
in evaluating it.
[20 marks]

QUESTION 6

Section 27 (1) of the Companies Act [Chapter 24:03] states as follows

“Subject to this Act, the memorandum and articles shall, when registered,
bind the company and the members thereof to the same extent as if they
respectively have been signed by each member to observe all the provisions
of the memorandum and of the articles.”

REQUIRED:
Critically discuss whether Section 27 (1) of the Companies Act [Chapter
24:03] has a contractual effect between members and the company.

[20 marks]

“End of Examination Question Paper”

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