Test yourself: Auditors…and a few others

Hi, I come with questions:

The directors of Elohim Foods Ltd are gearing up for their next AGM. Having recently garnered several excellence awards, they are looking to maintain and cement their good reputation by employing best practices. They are slightly baffled at the term voting by poll, they want to know ahead of the AGM what it means, particularly, what areas it can be used. As a legal officer in the company, your immediate boss, Mr Kasali (Head of Legal Department) has instructed you to write an internal memo explaining voting by poll, when it can or cannot be used; and who can demand for it.

Elohim Foods received a lot of accolades for immediately nipping fraud in the bud when it was discovered that Mr Shengelenge its former Executive Director had been siphoning money while supplying Mr Lucas, one of the auditors, with false information about the true state of things in the company. Mr Lucas knows there are still bad eggs and wants to get away from the drama quietly through a resignation letter which he gave to Mr Ebube, one of the directors. He didn’t want to further embarrass the other directors involved in the whole fraud.

On the day of the meeting with 36 out of 100 members present, they cannot agree on a chairman, so they go on, with everyone speaking at the same time. After heated arguments, some people walk out. The meeting goes on but they soon realise they are unable to make any real progress so they decide to come back in 2 months when ‘everybody’s head would have calmed down’. The meeting is adjourned.

Mr Ebube, is privileged to also be a director in one of Elohim’s biggest customers- Credence Bagging Products Ltd. Credence has made some faulty biscuit pack wrappers but the error is not apparent to the ordinary eye. Mr Ebube got wind of this, and as a form of damage control, he asked Credence to approach Elohim with slashed prices so as to get rid of the packets. He also encouraged the transaction on the Elohim side. With time customers were dissatisfied with the quality of the biscuits as they were not protected properly by the packets. Things have become bad; customers are suing Elohim, Elohim is suing Credence.

Mr Tubo has been an auditor at Elohim for 11 years out of the 20 years stipulated in his employment contract. He has been very efficient and is sure that at the upcoming AGM, he will be given the vote to go ahead again. He is watching everything happening and is worried about his reputation and what will happen to the company. He is to be a member of the audit committee in addition to his duties. He wishes they could just select shareholder alone and that they be well paid, to purge them of bias.


Answer the following:

  1. Draft the Memo
  2. Advise Mr Lucas on his method of resignation and the more proper procedure.
  3. How is the chairman of a meeting appointed? Mention two special rights/prerogative of being a chairman.
  4. Was there quorum in the meeting?
  5. If they were to pass a special resolution as they were (before the fight) how many would have to vote for the resolution to succeed?
  6. Do you have anything to say about the adjourned meeting? Say it; a.k.a comment on the propriety or otherwise of the proposed adjourned meeting.
  7. Give Mr Ebube a piece of your legal mind a.k.a comment on the validity and consequences of Mr Ebube’s actions regarding the transaction between Credence and Elohim.
  8. Advise Mr Tubo on the composition of an audit committee (cuz the guy obviously has his head in the clouds)
  9. ASSUMING Elohim were a bank would Mr Tubo have still be an auditor? How do you think his compensation would be calculated if he was let go before his contract expires?

Okay… the answers… yeah it’s way down, so before you scroll just give it a go.



RC NO: 12346





08043555555, 66757564


From: Your Name

To: The Board of Directors

Date: 01 September 2017


Voting by poll is one of the means of voting at general meetings in which each share carries one vote as opposed to the votes being counted according to the number of members physically present (voting by show of hands). It is simply put, voting by shares. Poll is not automatic, it is usually demanded by any of the following persons.

The chairman of the meeting if he is a member

Any three members physically present… (Check here)

Poll can be demanded anytime and the company whether by articles or sheer objection when demanded, cannot bar a members right to vote on any matter except, adjournment of meeting and the election of a chairman…

The company needs no further preparation for the meeting with regard to poll voting other than ensuring the register of members is at hand to prevent joint shareholders from casting double vote over their shares.

Thank You.


Your. F. Name Esq

Legal Officer

CC: Mr Kasali

Head, Legal Department


Lucas what the hell are you thinking!

The procedure set down for an auditor to resign under CAMA is as follows: See here

After narrating, In view of the foregoing, Mr Lucas ought to tender his resignation with the appropriate statement (of circumstances surrounding his removal, if any) at the registered office. He may also, if he wishes, requisition a meeting so that he can discuss the circumstances surrounding his resignation.


Chairman: the chairman of the board is to be the chairman but if he is not present or is unwilling to act, the board elects someone, if the board does not elect someone, member choose among themselves. See *here*

The obvious ones is the casting vote another one I can say is the right to call for poll voting, others may be the power to decide whether to go on with a meeting where a walkout was staged, power to adjourn a meeting. Let me know any other ones you have.



Quorum is one-third of the number of members who can attend the meeting or 25; whichever is less. If the members of the company are 6 in number, then quorum is 2.  So one third of a 100 members is approximately [literally 33.3333 but we’ll just say] 33. Therefore the quorum for this meeting is actually 25 (because the law says whichever is smaller between one-third and 25) and with 36 people in attendance they do have quorum.


Special resolutions need three-quarters of the members present (whether in person or by proxy) and voting to become binding Section 233 (2). Therefore we are looking at three-quarters of 36 [not 100 o] so that’s 3/4 x 36 [four cancel 36 to give 9, 9 times 3] which is 27. So 27 people must agree!


The CAMA provides in Section 239 that a general meeting may be adjourned to anytime within 30 days without the need to send out fresh notices of meeting, however where the adjourned date is 30 or more days away, there will have to be fresh notices of meetings issued to the members. Therefore, since the meeting is adjourned to two months, the company will have to issue notice of meeting in accordance with the CAMA requirement.


Mr Ebube I can’t believe you would do something so silly… On a more serious note, the statutory and judiciary precedents all show that the directors stand in a fiduciary relationship with the company. Therefore they are expected to exhibit the utmost good faith in their dealings with the company and ensure that they are exerting reasonable care in conducting the affairs of the company – Section 279. Consequently, although the law permits multiple directorship, it expects that any person who is director of two companies will not allow any conflict of interest. He is also prohibited from using privileged information obtained in one company to deal with the other or to his own or any other person’s advantage. Section 281

The company may bring an action in court against any director found guilty of any of the above acts. The director may also be removed under section 262 by the members in GM. From the foregoing, it is obvious that Mr Ebube has breached his duty of care to both Elohim Ltd and Credence Bagging Ltd by encouraging the latter to do something that is potentially damaging to their goodwill and exposing them to detrimental action. Therefore Mr Ebube will be liable to pay compensations to both companies for the losses they have faced flowing from his bad advice. He may also be removed by the company in accordance with section 262 of the CAMA.


The audit committee is to comprise of an equal number of shareholders and directors who must not be more than 6 altogether and not less than 2. Therefore, Mr Tubo himself cannot be a member of the committee since he is neither a shareholder nor a director, also his desire that all the members be shareholders is contrary to the provisions of the CAMA (kolewerk).


The CAMA makes no provision for the number of years a person may be the auditor of a company however paragraph 8(2) the COCG for Banks provides that a person cannot be the auditor of a bank for more than a consecutive period of 10 years. Therefore, Mr Tubo being in his 11th year must be retired.

With regards to his compensation, the CAMA allows an auditor to be compensated for removal contrary to the terms of his contract of employment. However if the removal is due to an intervening event such as a statutory provision, the auditor receives no compensation. Accordingly, Mr Tubo if removed would get no compensation since his removal will be pursuant to the COCG for banks.

C’est fini

When you have really long questions like the one above, read it carefully. You can underline, scribble possible answers and stuff before you proceed to write out you answer.

Please note that you should write the abbreviations in full, I’m sure you lecturers must have made a big deal out of it.

Once again, notice I didn’t talk much where too much talk is not needed. But if they ask a yes or no question you would do well to state the reason for your answer. For instance, my number 4 could have ended with yes, but anyone can say that, so I went on to give a rationale, for my answer; but I did not define quorum or explain what should happen where there is no quorum. Nobody will penalise you if you do all that, but under exam conditions, time is money so if something is unnecessary, you better leave it out.

Let me know what you think.


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