Corporate and Business Law

(Zimbabwe)
PART 2 TUESDAY 5 DECEMBER 2006

QUESTION PAPER Time allowed 3 hours This paper is divided into two sections Section A Section B SIX questions ONLY to be answered TWO questions ONLY to be answered

Do not open this paper until instructed by the supervisor This question paper must not be removed from the examination hall

The Association of Chartered Certified Accountants

Paper 2.2(ZWE)

Section A SIX questions ONLY to be attempted 1 Explain the distinction between binding and persuasive sources of law in Zimbabwe. (10 marks)

In relation to the law of contract: (a) Explain the interface between a voetstoots contract and aedilitian remedies for a latently defective article. (7 marks) (b) State whether the current law adequately caters for the present day demands of commerce in Zimbabwe. (3 marks) (10 marks)

In relation to the law of contract: (a) Explain the term breach of contract and the forms it usually assumes. (5 marks) (b) Briefly explain the major remedies available for breach of contract in Zimbabwe. (5 marks) (10 marks)

The concept of estoppel is invoked to establish ostensible authority in cases of agency . . . Required: Explain the nature and function of estoppel in a contract of agency. (10 marks)

In relation to company law: (a) State the restrictions that are placed upon the right of a promoter to select a name for a company. (6 marks) (b) State the restrictions that are placed upon the right of a company to change or alter its articles. (4 marks) (10 marks)

In relation to company law, explain the duties and responsibilities of a director to the company. (10 marks)

In relation to insolvency: (a) Define the concept of insolvency and state instances where an act of insolvency is committed. (5 marks)

(b) State the circumstances under which a person who has been declared insolvent can be rehabilitated in Zimbabwean law. (5 marks) (10 marks)

In relation to company law, briefly explain the following: (a) a rights issue; (b) placing of shares; (c) an issue of shares at a premium; (d) a bonus issue of shares; (e) the distinction between an original vote and a casting vote. (2 marks) (2 marks) (2 marks) (2 marks) (2 marks) (10 marks)

[P.T.O.

Section B TWO questions ONLY to be attempted 9 (a) On 24 October 2005, Petros and David signed a deed of sale whereunder David sold his house to Petros for $5 billion. Clause 11 of the deed of sale reads; This is the sole and exclusive memorandum of agreement between the parties hereto and any terms, conditions, warranties or representations not herein included are hereby excluded. Any variation in the terms of this agreement as may be agreed upon between the parties shall be in writing and signed by or on behalf of both parties otherwise the same shall be of no force or effect. The document signed by the parties was in a standard form. They also orally agreed that the sale was subject to Petros obtaining a mortgage bond from a building society within 30 days of the agreement. Petros communicated to David on 1 November 2005 advising him that he would not be going ahead with the application for the bond as he was sure he would raise the money by other means. David, who did not reply to this letter, sold the house to Zvevamwe on 13 December for $7 billion. At the beginning of March 2006, Petros wrote to David tendering the purchase price of $5 billion against the transfer of the house. It was only then that David informed him he had sold the house to somebody else. The house is now worth $10 billion. Petros sues David claiming: (1) specific performance or alternatively, (2) damages for breach of contract. Required: State Petros prospects of success if he were to sue for breach of contract claiming specific performance or alternatively damages. (10 marks) (b) John Shoko was employed as a cleaner and messenger by the Beachfront Hotel since August 2004. On 1 June 2006, he was called into the managers office and given the option of resigning or being prosecuted for theft. John denied that he had stolen anything but the manager told him that he had been seen stealing hotel bed linen valued at $50 million. The manager said: We have had enough of being ripped off by our employees. Either you go or we will make an example of you. I will ensure that you will never work again. John, who has a wife and four young children, plus an invalid mother, decided that it would be better to resign. He admitted guilt and agreed to reimburse the hotel $50 million for the bed linen. John seeks your advice as to whether he is obliged to pay the $50 million or not. Required: In relation to the law of contract advise John Shoko on his legal position. (10 marks) (20 marks)

10 Maria, Rumbidzai and Ngonidzashe are directors of Pleasurewaves (Pvt) Ltd, which arranges lakeside holidays, for young children and teenagers at Lake Mazvikadei, a huge inland dam about 100 kilometres from Harare. The holidays are normally taken during school and public holidays. Maria and Rumbidzai each holds 30% of the shares in the company. The remaining 40% is held by Ngonidzashe. All the directors are active in the running of the business and the profits are distributed mainly in the form of directors drawings, rather than as dividends. Ngonidzashe attended all meetings in which policy was formed and often suggested new ideas for the companys development. He was, therefore, surprised to learn that Maria and Rumbidzai booked a trip for themselves to Windhoek, paid for the trip out of the company funds describing it in a document to all shareholders as a research trip. On their return from Windhoek, Maria and Rumbidzai refused to allow Ngonidzashe to take part in any company decisions and refused to pay back the money spent on the trip. Ngonidzashe fears that the company is now unable to pay its debts as they fall due and consults you for advice. Required: Advise Ngonidzashe on his legal position arising from the facts. (20 marks)

[P.T.O.

11 (a) The main objects clause of Zvibayewega Investments Ltd as specified in the memorandum of association provides that the objects of the company is the provision of catering services. To this end, the company is authorised to establish hotels, motels and any other related enterprises. The company owns and operates four hotels and restaurants in the country, one each in Harare, Mutare, Bulawayo and the major resort town of Victoria Falls. The directors have unanimously decided to contract with an international Non-Governmental Organisation (NGO) operating in Zimbabwe, Compassion International, to hire to them for a period of six months ten big trucks belonging to the company. The NGO, Compassion International requires the ten trucks for the purposes of transporting relief aid mostly in the form of food and clothing to poor rural households that have been affected by a very severe drought. The rentals that have been agreed on for the hire of the trucks will enable the company to make a handsome profit. One of the minority shareholders, Mr Disgruntled, has serious reservations over this arrangement and he wants to know from you whether or not what the company has done is legal, and if there are any remedies that he may be able to pursue. Required: In relation to company law, advise Mr Disgruntled whether or not hiring out the ten trucks is lawful and specify the remedies that may be available to him. (12 marks) (b) Agrico (Pvt) Ltd is a duly registered company with limited liability and trading in terms of the laws of Zimbabwe. The companys objects clause enables it to process a whole range of grains and other forms of agricultural produce. At a duly convened meeting of Agrico Ltd it was agreed as follows; (1) that the share capital be increased from $1 billion divided into 1 billion ordinary shares of $100 each to $10 billion divided into 10 billion ordinary shares of $100 each; (2) that the objects clause of the company be changed so that the company can move into the manufacture of agricultural inputs such as fertilisers and chemicals; (3) that the designation of the managing directors position be changed to chief operating officer. Required: (i) State the type of meeting this was and state who was eligible to attend. (2 marks)

(ii) State the type of resolutions that were passed at the meeting in relation to the three issues. (3 marks) (iii) Assuming that the companys articles are silent on this aspect, state the minimum number of attendees to the meeting who are required to pass the three resolutions and explain what other conditions have to be met. (3 marks) (20 marks)

12 You are asked to give legal advice to Nhapitapi Cash and Carry Wholesalers (Pvt) Ltd based on the following facts as narrated to you by the companys administration manager, Mr Limukani Tembo. He says that on 1 May 2006 one of the companys junior managers (now deceased), Mr Clive Munyama was driving a Mazda 626 belonging to the company. The car looked like any other private car as it did not have a special logo or colours of the company. Munyama was travelling from Harare where he was ordinarily based to visit his elderly parents who are peasant farmers in Bikita district, Masvingo Province. At the same time Munyama was passing through Gutu district to inspect two of the companys retail outlets before proceeding to Bikita. When Munyama got to a place popularly known as Kumbudzi on the outskirts of Harare, he stopped to give a lift to three people, two males (both now deceased) and a third passenger a female adult by the name Beauty Kusasana, who was travelling on her own. Beauty was seated on the front passenger seat next to Clive Munyama, the driver of the car. About 30 kilometres from Chivhu, one of the front tyres burst and the driver lost control of the vehicle and it collided head-on with a Mazda T35 truck that was travelling in the opposite direction. As a result of the accident the two male passengers and Clive Munyama were killed instantly whilst Beauty was critically injured. She spent about six weeks whilst hospitalised at Chivhu General Hospitals Intensive Care Unit and she is now wheel-chair bound. As a result of the accident Beauty has suffered damages. The total amount of her damages is $2 billion and she has instructed Fast and Fury Legal Practitioners to recover the damages from Nhapitapi Cash and Carry Wholesalers. In his briefing to you Limukani Tembo brings to your attention a copy of the companys Policies and Procedures and under Section A (general conditions) the relevant excerpts read as follows: 1.1 Drivers Generally only company employees and authorised garage personnel are permitted to drive company cars and under no circumstance will unlicensed drivers or learners drive company vehicles. 1.2 Passengers The employee must note that he is not authorised to carry passengers except members of his immediate family, company staff and the company accepts no liability for unauthorised passengers. This ruling applies most particularly to hitch-hikers. Required: In relation to the law of agency, advise Nhapitapi Wholesalers on the issue of vicarious liability towards Beauty Kusasanas claim for $2 billion. (20 marks)

End of Question Paper