Question 2 Maso, Nyand and Nkoko established a garage to repair motor vehicles. They contributed startup capital, in cash, and provided expertise services. Nyand and Nkoko are very active partners in the business. In the course of their day today running of the business, they purchased a rental house at Shs 50 million. The proceeds from the rent are being used to pay fees for their children without the knowledge of Maso. Maso came to learn that the money for purchasing the house was withdrawn from the business. He is quite upset. He has also established a similar motor vehicle repairing garage in the neighborhood so that he can get some side income. and Nkoko are furious about this development. In another development, Mutawe, the company director of DLL Ltd, got a girl friend who kept him so busy, to the extent that he neither prepared proper accounting records nor submitted returns to the registrar for the last two years.

In a general meeting that was held recently, the company dismissed Mutawe because he no longer executed duties as expected. Mutawe, who considered himself a visionary director is disappointed with the decision and has vowed to fight on. Sonia, the promoter of DLL Ltd, was instrumental in forming the company. She mobilised for Shs 10 million to rent office premises before the company was formed. Sonia is demanding for the refund of his Shs 10 million now that the company is fully operational. However, the company has denied liability. As a result, Sonia has decided to drag DLL Ltd to court.

Required: Identify legal issues and resolve them. (20 marks)

Question 3 Waswa, Kato, Boby, Kamau and Zebongo are subscribers of Twin Siblings Ltd, a private company limited by shares. Whereas Waswa, Kato and Boby are directors, Kato is the most active. Last year, Kamau sold his shares to his longtime friend, Masaba before returning to his mother country, Kenya. Masaba submitted a duly executed transfer and the original share certificate to the company for him to be registered as a shareholder. In consultation with other directors, Kato declined to register Masaba on grounds that an 'insider' should have been given the first priority.

Through his lawyers, Masaba demanded notice of refusal. Kato ignored the demand. It happened that Dembe Ltd was facing related challenges. Kokot, a shareholder, sold all his shares to Patoma, a businessman. Patoma was given a duly executed transfer. However, a share certificate was not delivered to him on pretext that it was with the money lender which was not the case. A week after the transaction, Kokot sold the same shares to Resty and handed over the share certificate. Upon handing over the documents for registration, the director in charge of registration declined to register the transfer. Resty now claims for priority over the shares. In another case, Joput sold his TX Prado at Shs 300 million to Mudomo who paid Shs 130 million in cash and issued an open cheque of Shs 170 million payable on demand to the bearer. Badrisha Bank Ltd dishonoured the cheque, with words 'insufficient, funds refer to drawee'. The following day, Joput cited the car at Serepa Hotel having been impounded by police, on suspicion that Mudomo was a conman. It transpired that, at the time the cheque was dishonoured, Shs 180 million which was on Mudomo's account had been mistakenly read as Shs 130 million by the banking officer. When contacted by Joput, Mudomo claimed that the bank is responsible for the mess. Required:

Raise and resolve all the issues arising from the facts. (20 marks)

Question 4 Sebabi company Ltd that manufactures plastic materials was incorporated in Uganda on 20 November 2016. On 4th January 2019, the company directors made phone calls to shareholders of the company, inviting them for a meeting within 5 days. Kato, whose family is in China, could not make it for the meeting but was represented by Kimera. Some other members did not turn up and were not represented. They argued that time was insufficient for them to attend the meeting. When it came to time for voting , Kimera was denied the opportunity to vote by the company secretary on grounds that he was not a company member but just a mere representative of Kato. In another scenario, Mugongo International Ltd dealing in the supply of hardware materials, was incorporated in Uganda in 1995. The company acquired a loan of Shs 100 million from John, a money lender, in March 2019. The money was used to purchase trucks for ease of transportation and the balance to clear several debts.

Meanwhile, John has started demanding for payment but in vain. He has established that the company is heavily indebted and unable to pay its debts. John intends to cause its winding up. Required: Rise and resolve issues from the given facts.

Question 5 (a) Explain the qualifications and appointment of auditors. (b) Outline the rights and duties of auditors. (c) Describe persons who do not qualify to act as auditors.

Question 6 (a) Define the term 'debenture'. (b) In regard to priority of payments, describe the ways in which debentures may be issued. (c) Explain the contents of prospectus.