LAW-F26-BUSASSOC-07 COMPREHENSIVE MOCK EXAM
PREDICTOR 2026 Q&A
Which of the following best describes the legal effect of incorporating a
company under the Companies Act, 2015 of Kenya?
A. The company becomes an association of persons without separate
legal personality
B. The company acquires separate legal personality distinct from its
members
C. The company's members automatically become jointly liable for all
company debts
D. The company cannot sue or be sued in its own name
Correct Answer: B
Explanation: Upon incorporation, a company becomes a body
corporate with separate legal personality distinct from its
shareholders and directors, as established in Salomon v Salomon &
Co Ltd. This allows the company to own property, sue, and be sued
independently. Options A, C, and D contradict this fundamental
principle.
In Foss v Harbottle (1843), what fundamental principle regarding
company litigation was upheld?
A. Shareholders can always sue on behalf of the company for any
wrong
B. Legal proceedings involving a company must be initiated in the
company's name, not directors' or shareholders' names
C. Directors have personal liability for all company breaches
D. The corporate veil can be pierced in all cases of financial loss
Correct Answer: B
Explanation: Foss v Harbottle established that if a company is
involved in legal proceedings, they must be initiated in the
company's name, not its directors' or shareholders' names. This
protects the separate legal personality of the company. Options A, C,
and D are incorrect exceptions or misstatements.
,Which of the following is NOT a recognized exception allowing the
corporate veil to be pierced under Kenyan law?
A. Where the company is used as a facade to conceal fraud
B. Where the company is merely an agent for its shareholders
C. Where the company makes a profit
D. Where statutory provisions expressly require piercing
Correct Answer: C
Explanation: Making a profit is not a ground for piercing the
corporate veil. Valid grounds include fraud, agency relationships,
and statutory provisions under the Companies Act 2015. Options A,
B, and D are established exceptions.
What are the key features that should be included in a partnership deed
for a general partnership?
A. Only the names of partners and business location
B. Profit-sharing ratios, capital contributions, dispute resolution
mechanisms, and dissolution provisions
C. Shareholder voting rights and dividend policies
D. Board meeting schedules and executive compensation packages
Correct Answer: B
Explanation: A partnership deed should include profit-sharing
ratios, capital contributions, dispute resolution, and dissolution
provisions under the Partnership Act Cap 29. Options C and D relate
to companies, not partnerships. Option A is insufficient.
Under the Limited Liability Partnership Act (Cap 30A), which
characteristic distinguishes an LLP from a general partnership?
A. LLPs have unlimited liability for all partners
B. Partners in an LLP have limited liability for partnership debts
C. LLPs cannot engage in any business activities
D. LLPs require no registration
, Correct Answer: B
Explanation: LLPs provide limited liability protection to partners,
unlike general partnerships where partners have unlimited joint
and several liability. Options A, C, and D are factually incorrect.
What is the maximum number of partners allowed in a general
partnership under Kenyan law (excluding professional partnerships)?
A. 10 partners
B. 20 partners
C. 50 partners
D. 100 partners
Correct Answer: B
Explanation: Under the Partnership Act, a general partnership
cannot exceed 20 partners (except for professional partnerships).
Options A, C, and D are incorrect numbers.
Which of the following best describes the agency relationship in a
partnership?
A. Partners are never agents of the partnership
B. Each partner is an agent of the partnership and other partners for
partnership business
C. Only the managing partner can act as an agent
D. Partners can only act as agents with written consent
Correct Answer: B
Explanation: Under the Partnership Act Cap 29, every partner is an
agent of the partnership and other partners for carrying on
partnership business in the usual way. Options A, C, and D limit this
principle incorrectly.
What are the seven principles of the cooperative movement as espoused
in the Co-operative Societies Act?
, A. Profit maximization, competition, secrecy, exclusivity, hierarchy,
centralization, and rapid expansion
B. Voluntary and open membership, democratic member control,
member economic participation, autonomy, education, cooperation
among cooperatives, and concern for community
C. Mandatory membership, shareholder control, dividend
prioritization, government ownership, limited education,
competition, and profit focus
D. Single member ownership, director control, capital concentration,
private autonomy, no education, isolation, and individualism
Correct Answer: B
Explanation: The seven cooperative principles are: voluntary/open
membership, democratic control, economic participation,
autonomy, education, cooperation among cooperatives, and
community concern. Other options contradict cooperative
philosophy.
In the context of company meetings, what business is typically
transacted at an Annual General Meeting (AGM)?
A. Only emergency decisions
B. Adoption of financial statements, declaration of dividends, election
of directors, and appointment of auditors
C. Private director salary negotiations
D. Confidential strategic planning only
Correct Answer: B
Explanation: AGMs handle statutory business including adoption of
financial statements, dividend declaration, director elections, and
auditor appointments under the Companies Act 2015. Options A, C,
and D describe non-AGM functions.
What is the role of promoters in company formation?
A. To liquidate existing companies
B. To undertake initiatives to form a company and enter into
preliminary contracts
PREDICTOR 2026 Q&A
Which of the following best describes the legal effect of incorporating a
company under the Companies Act, 2015 of Kenya?
A. The company becomes an association of persons without separate
legal personality
B. The company acquires separate legal personality distinct from its
members
C. The company's members automatically become jointly liable for all
company debts
D. The company cannot sue or be sued in its own name
Correct Answer: B
Explanation: Upon incorporation, a company becomes a body
corporate with separate legal personality distinct from its
shareholders and directors, as established in Salomon v Salomon &
Co Ltd. This allows the company to own property, sue, and be sued
independently. Options A, C, and D contradict this fundamental
principle.
In Foss v Harbottle (1843), what fundamental principle regarding
company litigation was upheld?
A. Shareholders can always sue on behalf of the company for any
wrong
B. Legal proceedings involving a company must be initiated in the
company's name, not directors' or shareholders' names
C. Directors have personal liability for all company breaches
D. The corporate veil can be pierced in all cases of financial loss
Correct Answer: B
Explanation: Foss v Harbottle established that if a company is
involved in legal proceedings, they must be initiated in the
company's name, not its directors' or shareholders' names. This
protects the separate legal personality of the company. Options A, C,
and D are incorrect exceptions or misstatements.
,Which of the following is NOT a recognized exception allowing the
corporate veil to be pierced under Kenyan law?
A. Where the company is used as a facade to conceal fraud
B. Where the company is merely an agent for its shareholders
C. Where the company makes a profit
D. Where statutory provisions expressly require piercing
Correct Answer: C
Explanation: Making a profit is not a ground for piercing the
corporate veil. Valid grounds include fraud, agency relationships,
and statutory provisions under the Companies Act 2015. Options A,
B, and D are established exceptions.
What are the key features that should be included in a partnership deed
for a general partnership?
A. Only the names of partners and business location
B. Profit-sharing ratios, capital contributions, dispute resolution
mechanisms, and dissolution provisions
C. Shareholder voting rights and dividend policies
D. Board meeting schedules and executive compensation packages
Correct Answer: B
Explanation: A partnership deed should include profit-sharing
ratios, capital contributions, dispute resolution, and dissolution
provisions under the Partnership Act Cap 29. Options C and D relate
to companies, not partnerships. Option A is insufficient.
Under the Limited Liability Partnership Act (Cap 30A), which
characteristic distinguishes an LLP from a general partnership?
A. LLPs have unlimited liability for all partners
B. Partners in an LLP have limited liability for partnership debts
C. LLPs cannot engage in any business activities
D. LLPs require no registration
, Correct Answer: B
Explanation: LLPs provide limited liability protection to partners,
unlike general partnerships where partners have unlimited joint
and several liability. Options A, C, and D are factually incorrect.
What is the maximum number of partners allowed in a general
partnership under Kenyan law (excluding professional partnerships)?
A. 10 partners
B. 20 partners
C. 50 partners
D. 100 partners
Correct Answer: B
Explanation: Under the Partnership Act, a general partnership
cannot exceed 20 partners (except for professional partnerships).
Options A, C, and D are incorrect numbers.
Which of the following best describes the agency relationship in a
partnership?
A. Partners are never agents of the partnership
B. Each partner is an agent of the partnership and other partners for
partnership business
C. Only the managing partner can act as an agent
D. Partners can only act as agents with written consent
Correct Answer: B
Explanation: Under the Partnership Act Cap 29, every partner is an
agent of the partnership and other partners for carrying on
partnership business in the usual way. Options A, C, and D limit this
principle incorrectly.
What are the seven principles of the cooperative movement as espoused
in the Co-operative Societies Act?
, A. Profit maximization, competition, secrecy, exclusivity, hierarchy,
centralization, and rapid expansion
B. Voluntary and open membership, democratic member control,
member economic participation, autonomy, education, cooperation
among cooperatives, and concern for community
C. Mandatory membership, shareholder control, dividend
prioritization, government ownership, limited education,
competition, and profit focus
D. Single member ownership, director control, capital concentration,
private autonomy, no education, isolation, and individualism
Correct Answer: B
Explanation: The seven cooperative principles are: voluntary/open
membership, democratic control, economic participation,
autonomy, education, cooperation among cooperatives, and
community concern. Other options contradict cooperative
philosophy.
In the context of company meetings, what business is typically
transacted at an Annual General Meeting (AGM)?
A. Only emergency decisions
B. Adoption of financial statements, declaration of dividends, election
of directors, and appointment of auditors
C. Private director salary negotiations
D. Confidential strategic planning only
Correct Answer: B
Explanation: AGMs handle statutory business including adoption of
financial statements, dividend declaration, director elections, and
auditor appointments under the Companies Act 2015. Options A, C,
and D describe non-AGM functions.
What is the role of promoters in company formation?
A. To liquidate existing companies
B. To undertake initiatives to form a company and enter into
preliminary contracts
