Paper F4 (PKN)

Fundamentals Level Skills Module

Corporate and
Business Law
(Pakistan)
Tuesday 7 June 2011

Time allowed
Reading and planning: 15 minutes
Writing: 3 hours

ALL TEN questions are compulsory and MUST be attempted.

Do NOT open this paper until instructed by the supervisor.

During reading and planning time only the question paper may
be annotated. You must NOT write in your answer booklet until
instructed by the supervisor.
This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

ALL TEN questions are compulsory and MUST be attempted

1 Under the Constitution of Pakistan, 1973, explain the doctrine of separation of powers.

(10 marks)

2 In relation to company law, explain the duties that directors owe to their companies.

(10 marks)

3 In relation to the law of contract, explain and distinguish between a pledge and a hypothecation.

(10 marks)

4 Under the Companies Ordinance, 1984, explain the content and effect of the memorandum of association of a
company.

(10 marks)

5 Under the law of torts, explain:

(a) the tort of negligence; (5 marks)

(b) the torts of strict liability. (5 marks)

(10 marks)

6 Under the Contract Act, 1872, explain the rules relating to the assessment and award of damages for breach of
contract.

(10 marks)

7 Under the Payment of Wages Act, 1936 (Act):

(a) describe the object of the Act; (3 marks)

(b) define wages; (3 marks)

(c) state FOUR deductions which may be made from wages permitted under the Act. (4 marks)

(10 marks)

2
8 Rashid is in the business of import and export of sugar. He has been buying sugar from Discount Suppliers Limited
(DSL) for many years. Last month, while Rashid was abroad, DSL offered to supply sugar at a 5% discount to the
prevailing market price. Rashid told his manager, Ali, to place an order with DSL for the supply of 1,000 tonnes of
sugar. On a friends suggestion, Ali also put in some of his own money and placed an order for 1,100 tonnes (1,000
tonnes for Rashid and 100 tonnes for Ali) with DSL at the discounted price. 1,000 tonnes of sugar has since been
exported. The remaining 100 tonnes of sugar was sold by Ali in the local market at a profit. Rashid has returned and
discovered what has happened. Ali is of the view that since he had invested his own money the profit is his to keep.

Required:
Under the Contract Act, 1872, advise Rashid whether he is entitled to the profit made on the local sale of
100 tonnes of sugar.

(10 marks)

9 Kashif holds 20% shares in the issued share capital of Crown Textile Limited (CTL), a public unlisted company, which
has made significant profits over the years. Kashif heard from another shareholder, Qasim, that over the past six
months, three extraordinary general meetings were held to discuss the proposed merger of CTL with another company.
Kashif had not received any notices of these meetings and had no knowledge of them.
Kashif went to CTLs registered office during business hours to enquire about this matter and check whether the
members register contained his correct address. CTLs company secretary informed him that he may come back next
week. In spite of three more attempts, Kashif has not been allowed to inspect the register.
Subsequently, an employee at the registered office has informed Kashif that the members register and other statutory
books have not been maintained and other shareholders have also complained about this matter.

Required:
Under the Companies Ordinance, 1984, advise Kashif on the grounds on which he may seek winding up of CTL
by the court, and his chances of succeeding in such a claim.

(10 marks)

10 Waseem, aged 15, was very excited because he was to start summer camp at his school. However, his father was
taking the familys only car to Islamabad on business for a month. Waseem had been saving his pocket money for
some time so he decided to buy a bicycle. The bicycle he liked was priced at Rs. 7,00000, however Waseem had
only Rs. 200000 with him. The shopkeeper knew Waseem and his father, so he allowed Waseem to take the bicycle
on the promise to pay the remaining Rs. 5,00000 on his fathers return. Waseem rode the bicycle to and from the
summer camp for 15 days after which it was damaged in a fall.
Waseems father has returned from the business trip and wants to return the bicycle. The shopkeeper has refused and
wants the payment of the remaining Rs. 5,00000.

Required:
Under the Contract Act, 1872, advise Waseems father on the status of the contract between Waseem and the
shopkeeper, and any obligations that Waseem or Waseems father may owe to the shopkeeper.

(10 marks)

End of Question Paper