SKANS School of Accountancy

Business Law
Mock Exam
Level 2 Examination August 18, 2018
September 2018 Total marks:100
Time Allowed: 3 hours

Q.1 a) What do you understand by delegated legislation? Give two advantages and
disadvantages of such legislation. (05)

b) Hydrabaad said to Jamshoro, "I will buy your company, "WWE" from you for 50million
dollars, if you can hire "Karachi" as a wrestler for the company". Jamshoro agreed and
gave Karachi 1million dollars as joining fee. However before joining WWE, Quetta
contacted Karachi and hired his as a wrestler in their company. Jamshoro wants
Hydrabaad to buy the company as he had made necessary efforts to hire Karachi.
However, Hydrabaad refuses to buy the company from Jamshoro.

Under the Contract Act, 1872 identify the type of contract between Jamshoro and
Hydrabaad. Also state whether Hydrabaad is now bound to purchase the company from
Jamshoro. (04)

Q.2 a) Sharaqpur and Ahmadpur Sharqia lent Rs 2.0 million to Muridkey, Lahore and
Faisalabaad jointly. On due date Lahore became insolvent. Without informing Sharaqpur,
Ahmadpur Sharqia wants Muridkey to repay the full amount to him. Under the provisions
of Contract Act 1872 explain:
(i) Whether Muridkey can be compelled to pay the full amount to Ahmadpur Sharqia.
(ii) What rights are available to Muridkey, if he repays the full amount. (05)

b) Miss Kabirwala watched the movie "Twilight" in cinema. She absolutely hated the movie.
She gave it bad reviews on social media and insulted it in public. As a response the
director of the movie banned her from watching all further movies of this franchise in any
cinema, globally. So upon the release of Twlight: New moon, she acquired the tickets of
the movie through her best friend Rohri but on the night of the premiere she was
refused to enter the cinema. Kabirwala threatened to sue the cinema for damages,
claiming it was a case of unilateral mistake on the cinema's behalf and is enforceable.
Explain the validity of her claim. (05)

Q.3 a) List down the conditions under which the agent is personally liable (06)

b) Under the provisions of Contract Act, 1872, what are the duties of the finder of lost
goods? Under what conditions a finder of goods can exercise his right of sale? (05)

Q.4 a) Nurpur, Machikey and Islamabaad are partners in a firm. Islamabaad wants to admit his
sixteen year old son Rajwa as a new partner. Under the provisions of the Partnership
Act, 1932 can Rajwa be admitted to the partnership business? State the rights, liabilities
and limitations of Rajwa, if he is admitted to the partnership business. (05)

b) Sharing net profits usually creates a very strong inference that the parties have formed a
partnership. But in certain situations, the fact that the profits are shared or the parties
have agreed to share the profits will not by itself create a presumption that a partnership
was intended. List such situations as given in the Partnership Act, 1932. (05)
Q.5 a) What liabilities does the drawer of a bill of exchange incur under the Negotiable
Instruments Act, 1881? (03)

b) When must a bank refuse payment against a cheque? (07)

Q.6 a) Ziarat Associates (ZA) intends to register as a limited liability company without
adding the word ‘Limited’ to its name.

Under the provisions of the Companies Act, 2017 list the conditions which ZA must
satisfy for dispensing with the requirement of using ‘Limited’ to its name. (05)

b) The Directors of Mansehra Limited are considering to re-locate company’s registered

office from Karachi to Islamabad to carry on business more economically. Advise
Company Secretary about the steps which must be taken to re-locate the registered
office under the provisions of the Companies Act 2017. (05)

Q.7 You have been approached by CEO of your company on a contentious matter being faced by
him. While looking for the records of investment, he found that some investments of the
company are not being made in the name of company. Being a company secretary

a) You are required to explain the CEO the situations explained by the Companies Act 2017
where a company is allowed to do so.
b) Also explain him the alternate records available for such investments and criteria for its
inspection by anyone (10)

Q.8 a) Gujranwala and Company, Chartered Accountants, have received a request for
appointment as auditor of Orange Bank Limited (OBL). Most of the partners of
Gujranwala and Company maintain their accounts with OBL and are enjoying credit
card facilities from them. The maximum outstanding balance on the credit card facility,
due from any partner is Rs. 399,000.

b) Abbotabad and Company, Chartered Accountants, have received an offer for

appointment as auditor of Bahawlpur Limited. Mr. Peshawar who is a nominee director of
the Government on the Board of Directors of Bahawlpur Limited holds 25% shares in
Wazirabad Limited. The spouse of a partner also holds shares in Wazirabad Limited.

c) Mr. Sibbi, a legal practitioner, has received an offer for appointment as external auditor
of Larkana (Private) Limited (LPL). The paid up capital of LPL is Rs. 1,500,000 of which
40% is owned by Bannu Limited, a listed company.

d) After hundred days of incorporation, the directors of Rahimyarkhan Limited (RL) decided
to appoint Mr. Sargodha as the company’s statutory auditor. Mr. Sargodha was employed
by RL before he started his own practice

e) Mr. Sadiqabad has recently joined your firm as a partner. He has served on the Board of
Directors of Sambrial Limited (SL) until 30 June 2009, as a Government nominee. In
the Annual General Meeting of SL held on 31 August 2011, a shareholder has proposed
the name of your firm for appointment as the external auditors for the year ending 30
June 2012. (10)
Q.9 Faisalabad Limited, a public limited company, had convened a general meeting at 9:00 a.m. on March
25, 2008 to consider and if deemed fit, pass a special resolution approving the disposal of a part of
the company’s undertaking. The meeting commenced at 9:16 a.m. as the quorum was not present at
the scheduled time and was attended by 100 members (including 10 members represented through
proxies) holding 1,000,000 shares in aggregate. After a heated debate, voting was held through show
of hands and the chairman declared resolution successful as 78 votes were casted in favor of the
resolution.

On April 07, 2008, the shareholders who gave a dissenting vote in the meeting, lodged a protest with
the company claiming that the resolution was invalid on account of the following reasons:

(i) Chairman of the meeting was selected among the members instead of chairman of board of
directors.

(ii) Mr. Kashmir, a shareholder with a holding of 50,000 shares was represented by two proxies i.e.
Mr. Ziarat (30,000 shares) & Mr. Sibbi (20,000 shares). Both proxies were counted for the purpose of
voting.

(iii) Peshawar (Pvt) Limited holding 20,000 shares of the company , were represented by Mr Chiniot,
who is neither the director nor the employee of the company. He also voted in favour of the
resolution.

(iv) The shareholders who lodged the protest hold 300,000 shares and therefore the resolution was
approved by shareholders holding 70% voting rights only.

(v) Since the meeting could not be held on time, it became invalid and should be called again.

Discuss the validity of the resolution under the Companies Act 2017, in view of the complaint lodged
by the dissenting shareholders. (10)

Q.10 a) Bhakkar Limited (BL), a listed company, wants to increase its production capacity and is in
the process of acquiring a new plant for its soda ash project. The company is contemplating
to finance the project by issuing ordinary shares to the general public. In order to enhance
the credibility of its expansion project, BL’s management has decided to include a statement
from Mr. Shujaabaad, a mechanical engineer, in its prospectus.

Under the provisions of the Securities Act, 2015 describe the conditions which must be
satisfied for the inclusion of statement from Mr. Shujaabaad in BL’s prospectus (05)

b) Gujrat Limited (GL) has passed a special resolution in an extraordinary general

meeting, whereby all the preference shares issued by GL are to be converted
into ordinary shares. Some preference shareholders are not satisfied with the said
conversion and seek your advice with respect to the remedy available to the
preference shareholders after the said conversion.

In the light of the Companies Act 2017:

(i) Explain the conditions under which the aggrieved shareholders may approach
the Court.
(ii) What decision may be taken by the Court ? (05)