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No. of Pages - 04
No. of Questions - 10

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF SRI LANKA

CA PROFESSIONAL (STRATEGIC LEVEL I) EXAMINATION

DECEMBER 2012

16304 - COMMERCIAL LAW AND CORPORATE LAW

PART A - COMMERCIAL LAW - 40 MARKS

PART B - CORPORATE LAW - 60 MARKS

A candidate will not be considered for a Pass in this paper unless

required minimum marks are obtained in both Parts A & B

Instructions to candidates:

(1) Time allowed:

Reading and planning : 15 minutes
Writing : 3 hours

(2) Marks : 100 marks

(3) Answer all questions.
(4) Begin each answer on a separate page. Submit all workings.
(5) All answers should be in English Language, in the answer booklets provided.
________________________________________________________________________
PART - A
Question No. 01

On 1st of January 2012, Peter offered to sell his car to Jane for Rs 2.5 million. He also told
her, that he will keep the offer open for five days from the date of the offer.
On 2nd January 2012, Peter informed Kevin that he got a better price for his vehicle from
Richard and he is therefore selling his car to Richard on 3rd January.

Kevin a good friend of Jane, informed Jane about Peter's decision on the same day, (2nd
January 2012).
Jane pretended that she is not aware of Peter’s decision and accepted the offer on 4th January
2012.
At this point, Peter informed Jane that he has already sold his vehicle to Richard.
(a) Jane seeks your advice, whether she could file action against Peter for a breach of
contract. (7 marks)
(b) What would be your answer, if Jane did not receive any message from Kevin with
regard to Peter’s decision to sell the vehicle to Richard?
(3 marks)
(Total 10 marks)
Question No. 02

Stanley appointed Lal as his agent, to sell an antique table belonging to Stanley.
Stanley has instructed Lal, that under no circumstance should Lal sell the antique table for
less than Rs. 20,000.
Explain the legal position of the parties in each of the following situations:

(a) If Lal sold the antique table for Rs. 15,000.

(You may assume that there were no exceptional circumstances present, which
justified this transaction).
(5 marks)
(b) If Lal sold the antique table to Bernad for Rs. 20,000 and received a commission of
Rs. 1,500 from Bernad.
(5 marks)
(Total 10 marks)
Question No. 03

(a) “Crossed cheques cannot be encashed over the counter”.

Do you agree or disagree with this statement? Discuss. (4 marks)

(b) Radha Selwam, is one of the directors of a company, “Auris (Pvt.) Limited.”

On 1st December 2012, he received an “Account Payee” crossed cheque, post-dated

1st February 2013 and drawn in his personal name.

Since he does not have a personal account in his own name, he plans to deposit this
cheque, to the company’s account under the name “Auris (Pvt.) Limited” at Assorted
Bank.

He seeks your explanations on the following :

(i) Can he deposit this cheque to the company’s account as planned ?

(ii) Assuming he has a personal account, can he deposit this cheque immediately,
as he is short of cash?
(6 marks)
(Total 10 marks)

(2)
Question No. 04

Write short notes on any Two (2) of the following :

(i) The important features of Compulsory Arbitration.
(ii) Instances where a partner can apply to court for dissolution of the partnership
business.
(iii) The right of resale under the Sale of Goods Ordinance.
(iv) Objectives of the Electronic Transactions Act No. 19 of 2006.
(v) Objects of the Consumer Affairs Authority, established under the Consumer Affairs
Authority Act No. 9 of 2003.
(5 marks each)
(Total 10 marks)
PART - B
Question No. 05

(a) “A company is separate and distinct from those who own it, and those who manage
it”. Do you agree with this statement? Briefly explain. (4 marks)
(b) List six (6) instances where the courts can lift the Veil of Incorporation.
(6 marks)
(Total 10 marks)
Question No. 06

(a) “Yatara Company (Pvt) Limited” changed its name to “Yahala Company (Pvt)
Limited”, by a Special Resolution and the prior written approval of the Registrar of
Companies.
“Yahala Company (Pvt) Limited” seeks your advice as to the steps to be followed
after the passing of this Special Resolution under the provisions of the Companies
Act.
(4 marks)
(b) State the type of resolution needed to be passed by a company, under the following
scenarios.

(i) To change the Articles of the company.

(ii) To approve the declaration of dividends of a company.
(iii) To borrow Rs. 100 million from Prime Bank.
(iv) To reduce the Stated Capital of the company.
(v) To purchase a property in the name of the company.
(vi) To approve the year end audited financial accounts of the company.
(6 marks)
(Total 10 marks)
Question No. 07

(a) Arun and Lal decided to form a company called A & L (Pvt) Limited to import
electrical items from China.
Arun agreed to spend money to lease a property to run the business and for the
improvement of the infrastructure.

(3)
 Whereas Lal agreed to spend money on the incorporation process and other sundry
expenses of the business.
Arun and Lal seek your advice, whether they could claim such expenses from the
company A & L (Pvt) Limited, once it is incorporated.
(6 marks)
(b) (i) What is meant by an Overseas Company? (2 marks)
(ii) State the powers given to a Registered Overseas Company with respect to
holding/ owning land in Sri Lanka.
(2 marks)
(Total 10 marks)
Question No. 08

Meeran Company (Pvt) Limited bought three printing machines through its nominee, Paul
and Paul Partners.
Thereafter, Meeran Company (Pvt) Limited sold these printing machines to Santiago
Company (Pvt) Limited which it was promoting.
The sale was made with a huge profit to Meeran Company (Pvt) Limited, and also without
any disclosure that Meeran Company (Pvt) Limited was the true owner of these machines.
Explain the duty of disclosure of Meeran Company (Pvt) Limited as a promoter, in the above
transaction.
Also advise Meeran Company (Pvt) Limited, of the consequences of a breach of this duty of
disclosure.
(Total 10 marks)
Question No. 09

(a) Supun who is seventy (70) years old is seeking appointment as a director of a public
company, “Exceptional PLC”.
His school friend Malik who is a director of another public company, told Supun that
he cannot hold office as a director of the company “Exceptional PLC”.
Advise Supun. (5 marks)
(b) Explain the duty of directors on serious loss of capital under the provisions of the
Companies Act, No. 7 of 2007.
(5 marks)
(Total 10 marks)
Question No. 10

(a) As a registered company secretary, you have been asked by the chairman of a
company, as to what are the contents that should be included in an Amalgamation
Proposal under the Companies Act, No. 7 of 2007.
List five (5) of these contents. (5 marks)
(b) Judy, the company secretary of a company is required to deliver to the Registrar,
certain documents for the registration of an Amalgamation Proposal.
List five (5) of these documents. (5 marks)
(Total 10 marks)
(4)