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Debt capital

Unit: Company law

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August 2025

 1 Questions
Question 3b
​​Highlight SIX ways in which a company in your country can raise capital from the public.


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April 2025

 1 Questions
Question 3b
​​Describe SIX classes of debentures.


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December 2024

 2 Questions
Question 3b
​ ​​(i) Explain the meaning of the term “ultra vires borrowing”. 

(ii) Discuss THREE equitable remedies available to a lender of money “ultra vires” to the company.


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Question 3a
​​Identify FIVE company assets that can be used to secure a company’s borrowings.


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August 2024

 3 Questions
Question 3b
​​Distinguish between “convertible debentures” and “non-convertible debentures”.


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Question 3a
​​ Define the term “debentures”.


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Question 7a
​​(i) In Re Yorkshire Wool Combers Association Ltd., a floating charge is described as one that hovers over the assets of the company. 

 Required: 
 Examine THREE characteristics of a floating charge. 

(ii) Dee Ltd., registered a charge on its fleet of motor vehicles in favour of Pepeta Bank to secure a loan of Sh.2,000,000. Dee Ltd., has not honoured its loan repayment obligation for the past 14 months and Pepeta Bank considers the loan as defaulted. 

 Required: 
 State FOUR options available to Pepeta Bank to recover their money.


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April 2024

 2 Questions
Question 1b
​​Summarise FIVE similarities between “debentures” and “shares”.


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Question 5a
​​Outline FIVE legal requirements for a company to issue bonds or debentures as a form of debt capital.


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December 2023

 1 Questions
Question 3a
​​(i) Differentiate between “secured” and “unsecured” debt in a company.

(ii) Discuss THREE characteristics of a debenture.


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April 2023

 1 Questions
Question 7b
​​In the context of debt capital, state FIVE advantages of a trust deed.


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December 2022

 3 Questions
Question 6b
​​Discuss THREE remedies available to a lender who has acted in good faith and without knowledge that the company has borrowed money beyond its powers.


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Question 5b
​​Madax Transporters Limited registered a charge on its fleet of motor vehicles in favour of Kopesha Bank to secure a borrowing of Kenya Shillings Fifty Million (Sh. 50,000,000). Madax Transporters Limited has defaulted on the loan repayment. 

 Outline FOUR options available to Kopesha Bank as the chargee.


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Question 5a
​​In Re Yorkshire Wool Combers Association Limited, a floating charge is described as one that hovers over the assets of the company as compared to a fixed charge. With reference to the above statement: 

(i) Describe THREE circumstances that will cause the crystallisation of a floating charge. 

(ii) Outline TWO characteristics of a fixed charge.


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August 2022

 2 Questions
Question 5a
​ ​ ​​Outline six charges that must be submitted to the registrar of companies for registration.


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Question 5b
​​Highlight three particulars of an existing charge acquired by a company that requires to be submitted to the registrar of companies.


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April 2022

 1 Questions
Question 4c
​​Describe three characteristics of a debenture which creates a floating charge on the assets ofthe company.


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December 2021

 1 Questions
Question 6a
 (i) Identify two circumstances whenadebenture is redeemable. 

(ii) Qutline four rights of secured debenture holders.


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September 2021

 1 Questions
Question 1b
​​With reference to debt capital, describe five types of securities that must be registered as registrable charges.


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May 2021

 1 Questions
Question 4a
​​In the context of debt capital:

(i) Outline six terms contained in a debenture trust deed.

(ii) Highlight four advantages of a floating charge.


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November 2020

 2 Questions
Question 2a
​​Kamau borrowed Sh.50,000 from Hope Bank and deposited his XYZ Ltd's share certificate with a blank transfer as a security. Subsequently, he bought goods from the supermarket on credit worth Sh.15,000. The articles of association of XYZ Ltd. claimed a first and paramount lien on its members' shares on debts due to the supermarket. 

However, before the supermarket's lien arose the bank gave the supermarket notice of Kamau's share certificate having been lodged with the bank as a security for the loan. Kamau is unable to pay for the goods he obtained from the supermarket and has also defaulted on the loan. XYZ Supermarket wants to exercise its lien and the bank wants to exercise its equitable right to have the shares transferred into its name. 

Analyse the rights of: 

(i) The Bank.

(ii) XYZ Supermarket Ltd.


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Question 7a
​​Baridi Ltd. intends to expand its business by diversifying into other forms of business. The management of the company has resolved to start production of instant coffee.

The management is contemplating on whether to issue shares or debentures.

Required:

Advise the management of Baridi Ltd. the disadvantages of debentures over shares as a method of raising capital.


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November 2019

 1 Questions
Question 5c
​​Standard Limited issued a debenture to Finance Bank years ago. The debenture was described as a fixed and floating charge over all the assets of the company. However, due to inadvertence, the charge was not dated or registered within time. The company is now in liquidation and the loan is in arrears. Finance Bank seeks your legal advice on whether it can rely on the charge to prove its claim in liquidation proceedings ofthe company. 

Advise Finance Bank.


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May 2019

 1 Questions
Question 2b
​​In the context of debt capital:

(i) Outline four remedies of debenture holders if the company defaults.

(ii) Summarise three differences between "debentures"and "shares".


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November 2018

 2 Questions
Question 7c
​ ​​Explain the benefits of including a negative pledge clause in a floating charge to the holder.


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Question 6b
​​In relation to debt capital: 

(i) Highlight six types of company charges which require registration as outlined in the Companies Act. 

(ii) Explain four disadvantages of a floating charge to a debenture holder.


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May 2018

 2 Questions
Question 2a
​​ With reference to debt capital:

(i) Outline four circumstances under which a floating charge will crystallise. 

(ii) Explain four contents of a trust deed.


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Question 1b
​​Ben Sikujua, a sole trader carrying on a business in the printing industry has asked Milele Bank Limited to advance him Sh.500,000 as additional working capital. The bank is prepared to advance the money on condition that Ben Sikujua offers a security. Ben Sikujua has a share certificate for 5,000 shares issued by Jewel Company Limited. Ben Sikujua wants to know whether he can use the shares whose value is Sh.650,000 as a security for the loan. He further seeks to know whether he would still receive dividends even after he has charged the shares to the Bank. 

Advise Ben Sikujua.


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November 2017

 1 Questions
Question 6b
​​Wheels Limited issued a debenture to East Bank Ltd. four years ago. The debenture was in the bank's standard form described as a fixed and floating charge over all the assets of the company. However, due to inadvertence, the charge was neither dated nor registered within time. The company is now in liquidation and the loan is in arrears. The bank seeks your legal advice as to whether it can rely on the charge to prove its claim in the winding up proceedings of the company. 

Advise East Bank Ltd. on the implications of non registration of the charge.


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May 2017

 2 Questions
Question 7b
​​(i) Outline six contents of a debenture certificate.

(ii) Explain four rights that accrue to debenture holders.


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Question 4c
​​In the context of debt capital:

(i) State four advantages of a trust deed.

(ii) Explain three instances when a floating charge is deemed to crystallise.


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November 2016

 1 Questions
Question 4b
​​In the context of company charges, describe five principles governing the priority of the charges.


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May 2016

 1 Questions
Question 6b
​​Describe the charges that could be created by a company registered under the Companies Act.


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November 2015

 1 Questions
Question 5b
​​ In relation to a debenture trust deed: 

(i) Explain five advantages of a trust deed. 

(ii) Outline six particulars of the register of debenture holders.


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Pilot September 2015

 2 Questions
Question 5c
​​ Discuss three events when a floating charge might crystallise.


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Question 4a
​​ When debentures are offered for public subscription, the company usually enters into a trust deed with trustees. 

List six contents of a trust deed.


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