Janet and Jackson Onyango are forming a Limited Liability Company. They are seeking your legal advice on the issues listed below. Respond to the enquiries by Janet and Jackson Onyango on: a. What are the Memorandum and Articles of Association and is there a difference between the two? (5 marks) b. What details would you expect the two documents in (a) above to contain and what other information might you be able to give about these details? (15 marks) QUESTION TWO a) Outline the rules that govern pre-incorporation contracts. Cite a relevant case law to support your answer. (12 marks) b) Kioko, an Under Secretary in the Ministry of Viwandani was entrusted with the responsibility of selling the Ministry's boarded motor vehicles . He invited bids from members of the public to buy two Lorries . He also bid, through a nominee. Mwangangi, his own brother. Subsequently, he sold the lorries to Mwangangi, at Ksh.80,000 each. Kioko then formed Kima Company Lid and instructed Mwangangi to sell the lorries to the company at Ksh.350,000 each. A prospectus as issued to the public to subscribe for shares to Kima Company Ltd. The prospectus gave Mwangangi as the vendor of the lorries and did not disclose the profit Kioko was making. Musembi, a shareholder of the company , has learnt of the sale of the lorries to the company and the profit Kioko made and seeks your advice on the company's rights in respect of the same. Advise Musembi. QUESTION THREE The courts and also statutory provisions have provided justifications for ignoring fundamental principle of legal personality through the so-called doctrine of lifting the veil. Discuss (20 marks)

QUESTION ONE<br /><br />a. The Memorandum and Articles of Association are two key documents used in the formation of a company. The Memorandum outlines the company's objectives, powers, and scope of business, while the Articles of Association set out the rules and regulations for the internal management and administration of the company. The main difference between the two is that the Memorandum defines the company's purpose and defines the relationship between the company and its shareholders, while the Articles of Association govern the internal affairs of the company, such as the rights and duties of its members.<br /><br />b. The Memorandum would typically contain details such as the company's name, the nature of its business, the amount of capital that the company is authorized to raise, and the number of shares that the company is authorized to issue. It may also include other information such as the company's liability, the duration of the company, and the names of the subscribers to the Memorandum.<br /><br />The Articles of Association would typically contain details such as the company's name, the number of shares that the company is authorized to issue, the rights and privileges of the shareholders, the rights and duties of the directors, and the procedures for holding meetings and making decisions. It may also include other information such as the appointment and removal of directors, the appointment of officers, and the procedures for the transfer and transmission of shares.<br /><br />QUESTION TWO<br /><br />a) Pre-incorporation contracts are contracts entered into by a company before it is incorporated. These contracts are governed by the Companies Act and other relevant laws. The rules that govern pre-incorporation contracts include:<br /><br />1. Validity: Pre-incorporation contracts must be in writing and signed by the parties involved. They must also comply with the requirements of the Companies Act and other relevant laws.<br /><br />2. Performance: Pre-incorporation contracts must be performed before the company is incorporated. If the company fails to perform its obligations under the contract, the other party may be entitled to damages or specific performance.<br /><br />3. Liability: Pre-incorporation contracts may be enforceable against the company once it is incorporated. However, the liability of the company for pre-incorporation contracts may be limited to the amount of capital that the company is authorized to raise.<br /><br />Relevant case law: In the case of Re New Company of Grays Inn (1880), the court held that a pre-incorporation contract was enforceable against the company once it was incorporated, and that the company was liable for the debts and obligations incurred by the company before it was incorporated.<br /><br />b) Kioko, as the trustee of the Ministry of Viwandani, was entrusted with the responsibility of selling the Ministry's boarded motor vehicles. He invited bids from members of the public to buy two Lorries. He also bid, through a nominee, his own brother. Subsequently, he sold the lorries to Mwangangi, at $Ksh.80,000$ each. Kioko then formed Kima Company Lid and instructed Mwangangi to sell the lorries to the company at $Ksh.350,000$ each. A prospectus was issued to the public to subscribe for shares to Kima Company Ltd. The prospectus gave Mwangangi as the vendor of the lorries and did not disclose the profit Kioko was making. Musembi, a shareholder of the company, has learnt of the sale of the lorries to the company and the profit Kioko made and seeks your advice on the company's rights in respect of the same.<br /><br />In this case, the company has the right to recover the profit that Kioko made from the sale of the lorries to Mwangangi. This is because the profit was made by Kioko in his capacity as the trustee of the Ministry of Viwandani, and not in his capacity as a shareholder of the company. The company has the right to recover the profit because it was made at the expense of the company, and the company has the right to recover any losses that it has suffered.<br /><br />QUESTION THREE<br /><br />The courts and statutory provisions have provided justifications for ignoring the fundamental principle of legal personality through the so-called doctrine of lifting the veil. This doctrine allows the courts to look beyond the separate legal personality of a company and hold the company and its shareholders responsible for their actions.<br /><br />The justifications for lifting the veil include:<br /><br />1. Fraud or dishonesty: If a company is found to be involved in fraudulent or dishonest conduct, the courts may lift the veil and hold the shareholders personally liable for their actions.<br /><br />2. Piercing the corporate veil: If a company is found to be a sham or a facade for the personal activities of its shareholders, the courts may lift the veil and hold the shareholders personally liable for their actions.<br /><br />3. Agency: If a company is found to be an agent of its shareholders, the courts may lift the veil and hold the shareholders personally liable for the company's actions.<br /><br />4. Veil lifting for tax purposes: In some cases, the courts may lift the veil to hold a company and its shareholders liable for tax obligations.<br /><br />The doctrine of lifting the