Company Law study notes

These notes applies and  can be used by students pursuing the following Kasneb courses:

Certified public accountants-CA12.

Certified credit professionals-CP12.

Certified secretaries-CS12.

INTRODUCTION

This chapter of company law study notes deals with jurisprudence which is the study of the nature of law. Since the term law has no assigned meaning this chapter provides the various meanings that different scholars have assigned to law. It further advances to give the various classes of law, in other words the different types of laws.

KEY DEFINITIONS

Jurisprudence: The study of the nature of law

Accused: a suspect is charged with a crime

Cause of action:When a person’s civil or private rights are violated

Plaintiff:An aggrieved party or one who brings a cause of action to a court of law

Defendant:A person who is alleged to have committed a wrong or one against whom a cause of action is brought.

WHAT IS LAW?

The term law has no assigned meaning. It is used in a variety of senses. Although different  writers have attempted to explain the term Law, no generally accepted explanation has emerged. The study of the nature of law is known as Jurisprudence. Persons who explained the term law from the same point of view form a school of jurisprudence/thought. The word jurisprudence derives from the Latin term jurisprudence, which means “the study, knowledge, or science of law.” In the United States jurisprudence commonly means the philosophy of law. Legal philosophy has many aspects, but four of them are the most common. The first and the most prevalent form of jurisprudence seek to analyze, explain,  classify, and criticize entire bodies of law. Law school textbooks and legal encyclopedias  represent this type of scholarship. The second type of jurisprudence compares and contrasts law with other fields of knowledge such as literature, economics, religion and the social sciences. The third type of jurisprudence seeks to reveal the historical, moral, and cultural basis of a particular legal concept. The fourth body of jurisprudence focuses on finding the
answer to such abstract questions as “What is law?” and “How do judges (properly) decide cases?”

SCHOOL OF JURISPRUDENCE

1. Positivism

2. Historical School

3. Natural School

4. Sociological School

5. Marxist School

According to Hart, Law is a coercive instrument for regulating social behavior. This i s the Command Theory, which assumes that existence of a sovereign, who has the power to impose penalties/sanctions for compliance, which is not necessarily the case. Marxists postulate the theory that law serves the interests of the dominant classes in society. This explanation of law cannot pretend to be of universal application. According to Salmond:

Law is a body of rules or principles recognized and applied by the state in the administration of justice. Law has been defined as a body of binding rules o f human conduct prescribed by human beings for the obedience of human beings. In summary therefore, law consists of binding rules. It can therefore be defined as an aggregate or conglomeration of rules enforced by courts of law at a given time. Rules of la w are certain and originate from parliament and various religious practices of a society.

LAW AND MORALITY

Morality is the sense of judgement between right and wrong by reference to certain  standards developed by society over time. It consists of standards of behavior widely used by a society (prescriptions of society) and is binding on the conscience of the members of that society. An action that is considered to be opposed to morality will generally be frowned upon by that society. However, morality is not enforceable by courts of law. This is compared to rules of law, which are binding, enforceable and have sanctions in all cases. Wrongs in society are contraventions of law or morality or both. However, the law incorporates a significant proportion of morality. In such instances, where law and morality overlap, morality is enforced as a rule of law. Such morality becomes part of the law. E.g. killing a person is immoral as well as a crime. So is theft. However, certain wrongs in society contravene morality but not the law e.g. disrespect, failure to provide for parents, failure to rescue a drowning person e.t.c. What then is the relation of morality to law? The existence of unjust laws (such as those enforcing slavery, or legalizing abortions) prove s that morality and law are not identical and do not coincide. The existence of laws that serve to defend basic values such as laws against murder, rape, malicious defamation of character, fraud, bribery, etc. proves that the two can work together. Laws govern conduct at least partly
through fear of punishment. When morality, is internalized, when it has become habit -like or second nature, governs conduct without compulsion. The virtuous person does the appropriate thing because it is the fine or noble thin g to do, not because not doing it will
result in punishment. As such, when enough people think that something is immoral they will work to have a law that will forbid it and punish those that do it. . However if there is a law that says doing X is wrong and illegal and enough people no longer agree with that then those people will work to change that law.

NATURE, PURPOSE AND CLASSIFICATION OF LAW

FUNCTIONS/PURPOSES OF LAW

1. It promotes peaceful coexistence/ maintenance of law and order/ prevents anarchy

2. It is a standard setting and control mechanism. Law sets standards of behavior and conduct
in various areas such as manufacturing, construction, trade e.g. The law also acts as a
control mechanism of the same behavior

3. It protects rights and enforces duties by providing remedies whenever these rights or duties are not honored.

4. Facilitating and effectuating private choice. It enables persons to make choices and gives them legal effect.
This is best exemplified by the law of contracts, marriage and succession.

5. It resolves social conflicts. Since conflicts are inevitable, the rule of law facilitates their resolution by recognizing the conflicts and providing the necessary resolution mechanism.

6. It controls and structures public power. Rules of law govern various organs of Government and confer upon them the powers practiced by them. The law creates a limited Government. This promotes good governance, accountability and transparency. It facilitates justice in the society.

CLASSIFICATION/ TYPES OF LAW

Law may be classified as:

1. Written and Unwritten law

2. Municipal (National)  and International law

3.Public and Private law

4. Substantive and Procedural law

5. Criminal and Civil law

WRITTEN LAW

This is codified law. These are rules that have been reduced to writing i.e. are contained in a  formal document e.g. the Constitution of Kenya, Acts of Parliament, Delegated Legislation, International treaties etc.

UNWRITTEN LAW

These are rules of law that are not contained in any formal document. The existence of such  rules must be proved. E.g. African Customary law, Islamic law, Common law, Equity, Case law e.t.c. Written law prevails over unwritten law.

MUNICIPAL/ NATIONAL LAW

This refers to rules of law that are applicable within a particular  country or state. This is  state law. It regulates the relations between citizens  (among themselves) as well as between the citizens and the state. It originates from parliament, customary and religious
practices.

INTERNATIONAL LAW

This is a body of rules that generally regulates the relations between countries or states and
other international persons e.g. United Nations. It originates from international treaties or
conventions, general principles and customary practices of states.

PUBLIC LAW

It consists of those fields or branches of law in which the state has a direct interest as the sovereign. It is concerned with the Constitution and functions of the various organizations of government including local authorities, their relations with each other and the citizenry.
Public law includes: • Criminal Law • Constitutional Law • Administrative Law

PRIVATE LAW

It consists of those branches of law in which the state has no direct interests as the state /
sovereign. It is concerned with the legal relationships between persons in ordinary
transaction e.g.  Law of contract ,Law of property ,Law of succession ,Law of marriage  and Law of torts

SUBSTANTIVE LAW

It consists of the rules themselves as opposed to the procedure on how to apply them. It  defines the rights and duties of the parties and prescribes the remedies applicable. Substantive law defines offences and prescribes the punishment, for example: The Law of
torts, The Law of succession,  The Law of contract, The Law of marriage and The Penal Code1

PROCEDURAL LAW

This is adjectival law. It consists of the steps or guiding principles or rules of practice to be  complied with in the administration of justice or in the application of substantive law. For example: The Civil Procedure Code2  and The Criminal Procedure Code3
NB: The Evidence Act4 is both substantive and procedural

CRIMINAL LAW

This is the law of crimes. A crime is an act or mission committed or omitted in violation of  public law e.g. murder, treason, theft, e.t.c. All crimes are created by parliament through statutes A person who is alleged to have committed a crime is referred to as a suspect. As a general rule, suspects are arrested by the state through the police at the instigation of the complainant. After the arrest, the suspect is charged in an independent and impartial court  of law whereupon he becomes the accused. Criminal cases are generally prosecuted by the  state through the office of the Attorney General (AG) hence they are framed as R (the State) Vs Accused E.g. R v Kamenchu Under Section 77 (2) (a) of the Constitution, an accused person is presumed innocent until proven or pleads guilty. If the accused pleads not guilty, it is the duty of the prosecution to prove its case against him by adducing evidence i.e. the burden of proof in criminal cases is borne by the prosecution. The standard of proof is beyond any reasonable doubt i.e. the court must be convinced that the accused committed the offence as charged. In the event of reason able doubt, the accused is acquitted. If the prosecution proves its case i.e. discharges the burden of proof, then the accused is convicted and sentenced

The sentence may take the form of:-

1. Imprisonment

2. Fine

3. Probation
4. Corporal punishment

5. Capital punishment

6. Community service

7. Conditional or unconditional discharge

Under Section 77 (4) of the Constitution, a person cannot be held guilty of an act or omission which was not a criminal offence on the date of omission or commission.

CIVIL LAW

It is concerned with the rights and duties of persons i.e. individuals and corporations.
Branches of civil law include:Law of contract, Law of torts, Law of property, Law of marriage and Law of succession

When a person’s civil or private rights are violated, he is said to have a cause of action. Examples of causes of action:Breach of contract, Defamation, Assault, Negligence,Trespass to goods e.t.c.Causes of action are created by parliament through statutes as well as the common law and  equity. The violation of a person’s civil rights precipitates a civil case or action. The person whose  rights are allegedly violated sues the alleged wrongdoer hence civil cases are framed as Plaintiff v Defendant.
It is the duty of the plaintiff to prove his allegations against the defendant. This means that the burden of proof is borne by the plaintiff. The standard of proof in civil cases is on a balance of probabilities or on a preponderance of probabilities i.e. the court must be satisfied that it is more probable than improbable than the plaintiff’s allegations are true. if the plaintiff proves his allegations by evidence, he wins the case and is awarded judgment which may take the form of:-

1. Damages (monetary compensation)

2. Injunction

3. Specific performance

4. Account

5.Tracing

6. Winding up a company

7. Appointment of receiver

THE RULE OF LAW

The concept of the Rule of Law is a framework developed by Dicey on the basis of the  English Legal system. It is also described as the due process.According to Dicey, rule of law comprises three distinct conceptions namely:

1. Absolute supremacy or predominance of regular law: this means  that all acts of the State are governed by law. It means that a person can only be punished for disobedience of the law and nothing else.

2. Equality before the law: this means equal subjection of all persons before the law. It means that no person is exempted from obeying the law. All classes of persons are subjected to the same judicial process regardless o f their age, sex, creed, gender or race.

3. The law (Constitution) is a consequence and not the source of rights: means that the law is a manifestation of the will of the people.

FACTORS UNDERMINING RULE OF LAW

  • Excessive power of the Executive
  • Non – independent Judiciary
  • Corruption
  • Selective prosecution
  • Civil unrest
  • Ignorance of the law

PROFESSIONAL ETHICS AND THE LAW

Principles that have to be followed by a professional accountant include:

a) Integrity It refers to the character of the accountant. The accountant should be one who is of unquestionable morals, honest, trustworthy and forthright.
b) Professional Independence This refers to the ability of the accountant to do his work without following any instructions from the client or any other person for any reason. The independence ensures that the accountant will be truthful and will carry out his
duties in accordance with the dictates of the profession as opposed to personal whims.
c) Confidentiality This is the duty of secrecy. It is the duty not to divulge to third parties any information that has been received by the accountant in his capacity as such or to use such information in any way for any other purpose without the consent of the client
or express authority of the law.
d) Professional Competence Means that for a person to render professional services as an accountant he must have attained the professional ability to do so i.e. he must have the necessary qualifications after having gone through a prescribed course of study.
A person who has fulfilled the requirements of the Accountants Act5 in relation to qualifications is deemed to be professionally competent.

FUNCTIONS/PURPOSES OF LAW

1. It promotes peaceful co-existence

2. It is a standard setting and control mechanism.

3. It protects rights and enforces duties by providing remedies

4. Facilitating and effecting private choice.

5. It resolves social conflicts.

6. It controls and structures public power.

7. It facilitates justice in society.

CLASSIFICATION OF LAW

a) Written and unwritten Law.

b) Public and Private Law.

c) Substantive and Procedural Law.
d) Criminal and Civil Law.

e) Municipal (National) and International Law.

 

Chapter 2

SOURCES OF LAW

The phrase sources of law literally means where rules of law are found. However, the phrase  has been used in a variety of senses. It has been used to describe:

i. The origins of the rules and principles which constitute the law applicable in a country at a given time.

ii. The source of force or validity of the various rules or principles applicable as law in a country.

iii. The materials from which rules of law developed.

iv. The factors which influence the development of the rules of law.
Hence the phrase sources of law has been used to describe the legal, formal, historical and material sources of law.

The various sources of law of Kenya are identified by:

1. Judicature Act

2. Constitution

3. Hindu Marriage and Divorce Act

4. Hindu Succession Act
5. Kadhis Court Act.

Sources identified by the Judicature Act:

1. The Constitution

2. Legislation (Act of Parliament) (Statutes)

3. Delegated legislation

4. Statutes of General Application

5. Common law

6. Equity

7. Case law or (judge –made law)

8.Africa Customary law

——————————————————————————————————————————————

Leave a Reply