Paper 2.

2(ZWE)
Corporate and
Business Law
(Zimbabwe)

PART 2

TUESDAY 6 JUNE 2006

QUESTION PAPER

Time allowed 3 hours

This paper is divided into two sections

Section A SIX questions ONLY to be answered

Section B 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

Section A – SIX questions ONLY to be attempted

1 In relation to the Zimbabwean legal system;

(a) Define the concept of arbitration and outline how it operates in Zimbabwe (5 marks)
(b) State the major advantages of arbitration over conventional litigation. (5 marks)
(10 marks)

2 In relation to the law of contract, discuss the approach of the Zimbabwean courts to the question of damages for
sentimental loss in breach of contract cases.
(10 marks)

3 In relation to contract law;

(a) Explain the differences between an option, right of first refusal and right of pre-emption. (5 marks)
(b) State the remedies available to each of them in the event of breach of these rights. (5 marks)
(10 marks)

4 In relation to company law;

(a) State the rights and duties of a member of a company. (5 marks)
(b) (i) Explain the differences between a private company limited by shares and a public company limited by
shares. (3 marks)
(ii) Explain the meaning of the term ‘convertible debentures’. (2 marks)
(10 marks)

5 In relation to company law;

(a) Explain the purpose and function of a prospectus. (5 marks)
(b) State how a scheme of arrangement works. (5 marks)
(10 marks)

6 (a) State the circumstances under which a company may be wound up voluntarily in Zimbabwe (5 marks)
(b) State the functions and duties of a provisional liquidator. (5 marks)
(10 marks)

7 In relation to agency law;

(a) Define the contract of agency and state its various types. (5 marks)
(b) State the duties of the agent towards the principal and the remedies available to the principal in the event
of breach of the contract of agency. (5 marks)
(10 marks)

8 In relation to employment law;

(a) State whether Zimbabwean law recognises the right to strike. (5 marks)
(b) State the steps that should be taken by workers before they can engage in collective job action in terms of
the Labour Act. (5 marks)
(10 marks)

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Section B – TWO questions ONLY to be attempted

9 (a) Chimusoro is the sole shareholder of Thandabantu Butchery (Pvt) Ltd specialising in the retail of both fresh and
frozen meat products. The butchery is situated in Budiriro, one of Harare’s bustling high density surburbs. He
narrates the following story to you:
In 2004 I spent a lot of time and money visiting n’angas (native doctors) and faith healers to improve my
health which has been on a decline in recent times. Although I am a married man, my well-known girlfriend,
Nakirwai stepped in as manageress of the butchery. She managed the place so well in the first month that
one day I made a verbal undertaking to her that she could carry on as manageress for six months and that
in return I would buy her a car as a reward.
Towards the end of 2004 the Cold Storage Commission (a statutory body from which we buy all the meat
sold in the butchery) organised a competition in which the best run butchery in Harare would win
$100 000 000.00. I was pleasantly surprised when my butchery was voted the best and now Nakirwai is
refusing to hand over the prize money or even share with me the $100 000 000.00. In the meanwhile I
bought gifts for Nakirwai, a double bed, hi-fi radio and wardrobe from Easyterms Furnitures (Pvt) Ltd. I paid
cash for the three items and they have since been delivered to Nakirwai’s house. I am made to understand
that the mattress base collapsed into a heap on first use and a carpenter at Siya-So Industries in Magaba
who later examined it said that the material used in making the mattress base was of a very inferior quality.
At the same time, my health has not improved at all and both the n’anga (native doctor (Dr Godobori)) and
the faith healer, Madzibaba are demanding $15 000 000.00 and $20 000 000.00 respectively for services
so-called rendered. I am extremely reluctant to pay this money. My relations with Nakirwai have
considerably soured and I wish to recover from her the wardrobe, hi-fi radio (which were given to her in
anticipation of a long-term association) and the prize money.
Nakirwai is adamant that she will not surrender any of the said items.
Required
Advise Chimusoro of his legal position in relation to the following matters:
(i) the contract involving the sale of sub-standard base and mattress. (3 marks)
(ii) the claim relating to the prize money, the hi-fi radio and the wardrobe. (3 marks)
(iii) Nakirwai’s claim for the delivery of a car which was promised to her. (4 marks)

(b) Pollony is a wealthy businessman who owns a widgets manufacturing factory in Harare. Marava Transport (Pvt)
Ltd, a company duly registered with liability in accordance with the laws of Zimbabwe, is a public carrier.
Polony and Marava Transport (Pvt) Ltd enter into an agreement whereunder Marava Transport undertake to
transport Pollony’s widget-making machine from Durban, South Africa to Harare for an agreed charge. The
contract is contained in a standard form, which Pollony signs without reading. Clause 9 thereof provides:
‘Goods are carried at owner’s sole risk. Neither the company nor any of its servants or agents shall be under
any liability whatsoever for any loss or damage howsoever caused or arising.’
Clause 11 reads:
‘This is the sole and exclusive memorandum of the agreement between the parties hereto and any terms,
conditions, warranties or representations not herein included are hereby excluded.’

3 [P.T.O.
 Before signing the agreement, Pollony asked Evidence, the Marava Transport (Pvt) Ltd representative, with whom
he was dealing, whether their charge included insurance. To this enquiry, Evidence replied in the affirmative.
Owing to the negligence of the driver concerned, an employee of Marava Transport, the vehicle transporting the
widget-making machine is involved in an accident. As a result of the accident, Pollony’s machine which is worth
$250 000 000.00 is damaged and it will take another six months to import a replacement. Under normal
circumstances, Pollony would have made profit of $300 000 000.00 during the six months it will take to import
a replacement. However, Pollony can establish that on account of the acute shortage of widgets in the country,
had the machine been installed on time, he would, in fact have made profit of $500 000 000.00 in the six
months it will take to import a replacement.
Required:
State the remedies which are available to Pollony. (10 marks)
(20 marks)

10 Maheu (Pvt) Ltd manufactures soft drinks. Its articles of association are modelled on Table ‘A’ of the Companies Act.
The objects clause of its memorandum of association consists of one paragraph namely;
The objects of the company are:
1. to carry on business as a general commercial company, and
2. to do any acts which in the opinion of directors are profitable and incidental to (1) above.
Wonder is appointed managing director. He has been a member of the research team working in a neighbouring
country Limpopovia on a new drink called ‘Go-Drink’. Wonder tells the directors that he is negotiating for the exclusive
distribution rights of ‘Go-Drink’ in Zimbabwe which would bring huge profits to Maheu. Maheu pays large sums to
Wonder for special services and also to the Limpopovia company for the exclusive rights to market the drink in
Zimbabwe.
Wonder does not disclose that his brother-in-law holds 20% shares in the Limpopovia company which manufactures
the drink. Maheu suffers severe losses when Go-Drink proves unpopular in Zimbabwe.
The chairman of the board induces all directors to sign a written resolution to the effect that ‘. . . the Go-Drink fiasco
was not Wonder’s fault’. Wonder resigns to concentrate on his research. The chairman gives Wonder the company car
as a ‘token of our esteem’. The board agrees to divide $5 billion among its ex-employees whom it has retrenched as
a result of the failure of the Go-Drink project.
Sarah who is a minority shareholder has just heard of these events (none had been communicated to shareholders).
She is furious upon learning of these events and is threatening to take immediate legal action.
Required:
Advise Sarah on the legal issues raised in the above facts.
(20 marks)

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11 (a) Phillip Mbozha holds 95% of the shares in African Wildlife Delights (Pvt) Ltd, a leading company in the wildlife
and eco-tourism sector. The rest of the shares are held by his half-sister, Chimbwido who is also a non-executive
chairman of the board of directors of the company. Phillip is employed as a marketing executive by a Government
Parastatal Organisation that regulates the tourism industry in the country and in order to avoid a conflict of
interest situation arising, he decided not to take a seat on the Board of African Wildlife Delights (Pvt) Ltd.
One Sunday morning whilst relaxing and reading newspapers over a cup of coffee in the family home he sees a
story in the Sunday edition of a local tabloid newspaper with the following headlines:
‘managing director of Wildlife Delights is involved in a fight in a restaurant’
The story details how Mr Razorman Rover, the managing director in question, was involved in a late night
altercation at a popular restaurant with two other men over a misunderstanding involving Alice Brown, Razorman
Rover’s companion on that fateful evening. One of the men claimed that he was owed money by Alice Brown
which had not been paid for some time. Alice Brown and Rover had been having dinner together at the restaurant
when they were confronted by the two men.
Phillip Mbozha gets very angry at the story, promptly picks up the phone and calls Mr Razorman Rover and
berates him as follows:
‘You are dismissed from your post as managing director of my company with immediate effect. You are also
removed from the company’s board of directors. Your deputy Timid Nyarai will now act as acting managing
director until a substantive appointment has been made. You are a huge embarrassment to my company . . .’
Required:
Critically comment on the actions taken by Phillip Mbozha clearly explaining the legal issues surrounding the
summary dismissal from employment and the removal from the board of the company as its managing
director. (12 marks)

(b) The main object of Nhapitapi Enterprises (Pvt) Ltd as contained in its memorandum of association is ‘to carry on
the business of bread, cake, sweet and biscuit makers, manufacturers and confectioners . . .’
However, the company has expanded into the retail sector whilst still operating its manufacturing business. The
directors have decided that the objects clause of the memorandum will have to be changed.
Required:
State the procedure to be adopted by Nhapitapi Enterprises (Pvt) Ltd to change its main object. (8 marks)
(20 marks)

5 [P.T.O.
12 Charity was having a number of problems in her new job. Among other things:
(a) she was denied vacational leave which she used to get under her previous employer;
(b) she was periodically moved about the factory department to department;
(c) she was not allowed visitors during working hours.
She brought these complaints to the attention of the Workers’ Committee to no avail and subsequently reported the
matter to the trade union who similarly did nothing about the matter. She decided to protest by not coming to work
for two days and informed management accordingly.
Upon her return she was asked to do a job previously done by her subordinate and was asked to transfer from Harare
to Bulawayo almost 500 kilometres away, without hearing from her first.
She approaches you for advice on the whole range of issues raised above.
Required:
Advise Charity on her legal position in relation to the facts raised by the problem.
(20 marks)

End of Question Paper