Study Unit 01 - Meetings and the provisions of the Companies Act 71 of 2008

Introduction

The management of the business and affairs of a company it conducted through meeting. It is
therefore imperative that a company should ensure that its meetings comply with the provisions of
the Companies Act 71 of 2008 to be valid. Carefully read through the two questions below and see if
you are able to provide the correct legal advice by using the following steps:

1. Identify the specific legal problem that appears from the given facts while keeping in mind what is
asked.

2. Identify the applicable principles and provisions of the Companies Act 71 of 2008.

3. Consider whether any case is relevant, and if so discuss the relevant principles.

4. Apply the provisions and legal principles to the given facts.

5. Conclusion: Clearly answer the specific question asked.

Now try to answer the following questions. Remember in this discussion form you may also raise any
other topic related to study unit 1 you wish to discuss.

Question 01

Themba lives in Knysna. He is a shareholder of Electrotech Limited. He received notice of an annual

general meeting of Electrotech Limited to be held in Pretoria. He cannot attend the meeting on that
day, but feels strongly about certain of the proposed resolutions set out in the notice of the meeting,
and wants to express his views on these matters to the board of directors. Themba also wishes to
vote against certain of the resolutions which the company proposed to pass. Advise Themba of two
methods under the Companies Act 71 of 2008 that he could use to exercise his right to vote and to
express his views at the annual general meeting of Electrotech Limited.

Questions 02

Pele (Pty) Ltd calls a meeting of its shareholders to vote on the proposed merger of the company
with another company. The notice of the meeting does not state a record date. Discuss the
relevance of the record date in this instance, and the consequences of the failure to specify the
record date in the notice of the meeting.

(2018-07-16 08:36:22)

ANSWER

Dear Student

See below guidance on how to approach the posted question. It is not only the answer that is
important to note but also see if you can understand the structure in which the proposed answer is
presented. The structure should help you with most company law questions and ensure that you
cover all the aspects of the legal problem you are confronted with.

Legal problem/question
It has to be determined whether a shareholder (Themba) can participate in a shareholder meeting
without being physically present.

Identity the relevant provisions in the Companies Act 71 of 2008

a. Section 58 deals with the appointment of a proxy.

b. A person may be appointed to represent the shareholder (Themba) at the meeting. It is

important to note that the person who is appointed as the proxy does not have to be a
shareholder of the company. See section 58(1).

c. The proxy may participate in, speak and vote at a shareholders meeting.

d. The appointment must be contained in a written form dated and signed by Themba. See
section 58(2)(a).

e. The appointment of a proxy is valid for one year. See section 58(2)(b).

Conclusion: Themba can participate in the proposed meeting by appointing a proxy.

In your analysis of the given facts, you should have noted that you are dealing with a public (Ltd)
company. This is important because this brings section 61(10) into play.

a. Meetings of public companies registered in South Africa must be accessible by electronic

participation. See section 61(10).

b. This can take the form of telephone communication or by video conference. See the exact
wording of section 63(2).

c. The meeting may be conducted by electronic communication only if all the persons
participating in the meeting are able to communicate concurrently with each other without
an intermediary and to participate reasonably effectively in the meeting.

d. Access to the electronic communication is at the expense of the shareholder unless the
company determines otherwise.

From this question, you should have learned that a shareholder could participate in a shareholders
meeting by appointing a proxy in terms of section 58. When dealing with a public company an
additional option is available namely the participation in a meeting via electronic communication.
Remember that a proxy may also make use of electronic communication to participate in a
shareholders meeting.

Question 02

Legal issue/question:

The record date determine certain rights of shareholders.

The names of the shareholders whose names appear on the register of shareholders has the
following rights:-
 a. The right to receive notice of a shareholders meeting

b. Has the right to participate and vote at a shareholders meeting

How is a record date determined:-

a. The board sets the record date. Note that this date may not be earlier than 10 business days
prior to the meeting.

b. If the board fail to set a record date, the record date is the date of the last day on which
notice should be given to a shareholder of a shareholders meeting. In respect of public
companies, this will be 15 business days and in respect of private companies this will be 10
business days.

Read all the provisions of section 59 again.

If you feel the need to contact me directly you are more than welcome to do so at
swartwjc@unisa.ac.za or 012 429 8494.

Kind regards

Christiaan

(2018-07-31 07:13:49)

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General Subject Related Discussions: Study unit 2 - Directors, Board committees

and Company secretary

Question

Ringona Ltd is a listed public company. Jombi has recently been appointed as company secretary,
but not as a director. During the first board meeting that she attends to keep minutes a decision is
taken by the board not to send the annual financial statement to certain parties, even though they
are entitled to it, as the company did not perform well in the previous year. The board agrees that its
decision is in the best interest of the company, as doing otherwise may have a negative impact on
the company. Jombi intervenes and informs the board that what they intend to do is in
contravention of the Companies Act 71 of 2008. The board members immediately reprimand her
and remind her that she is not a board member and therefore does not have a say. They further
adopt a resolution to have her removed as company secretary.

Upon hearing that you are studying Company Law at UNISA, Jombi approaches you for legal advice.
She believes that she did nothing wrong and feels that she was wrongly removed. Advise her
accordingly.

(2018-07-25 10:07:15)

Question 01 – compare self-answer with those below:

Legal question

The appointment of a company secretary and the removal of a company secretary.

Identify the legal principle

 1. Duties of a company secretary

2. Resignation or removal of a company secretary

Explain the legal principle and its source

Section 86(1) of the Act. A public company or state-owned company must appoint a person
knowledgeable or experienced in relevant law as a company secretary.

Section 88(2) of the Act. A company secretary’s duties include but are not restricted to

a. Providing the directors of the company collectively and individually with guidance as to their
duties, responsibilities and powers

b. Making the directors aware of any law relevant to or affecting the company.

Apply the legal principle to the facts given to you.

Ringona Ltd is listed as a public company. A company secretary is required for a state owned
company or a public company. Jombi was within her rights as a company secretary to inform the
board that they had to comply with the companies Act. Jombi has to inform the company of any
contraventions of the company law as it states in Section 88(2)(b) of the Act. Inform the company of
any law affecting the company.

Conclusion

This would be an unfair dismissal as Jombi was doing her duties as what is required of her as a
company secretary in Section 88 of the Act. (2018-08-11 10:33:07)
Question (a)

The general principle

In terms of section 38 of the Companies Act 71 of 2008, the board of directors may resolve to issue
shares in a company at any time in accordance with the provisions of and within the classes
authorised in terms of the company’s Memorandum of Incorporation. Thus the approval of the
shareholders is not required for the issue of shares unless the Memorandum of Incorporation
provides otherwise.

The provision of section 41

However, section 41 of the Companies Act requires shareholder approval by a special resolution for
issuing shares in certain cases.

Shareholder approval for issuing shares in certain cases

i. Chief Executive Officer (prescribed officer)

Legal principle

In terms of section 41(1)(a) of the Companies Act 71 of 2008, the approval of the shareholders by
special resolution is required where the issue of shares is to a present director or prescribed officer
of the company.

Application of legal principle

A Chief Executive Officer of a company is a director or a prescribed officer of the company. The
approval of the shareholders by special resolution will be required to issue the shares to him or her.

ii. Mr Molefe (director)

Legal principle

Section 41(1)(a) of the Companies Act 71 of 2008 provides that the approval of shareholders by
special resolution is required when shares are issued to future directors. Section 41(6) of the Act
provides that a “future director” does not include a person who becomes a director of the company
more than six months after acquiring a particular right.

Application of the legal principle

Mr Molefe would be a future director of the company because he will become a director in three
months’ time. Therefore, shareholder approval will be required to issue the shares to Mr Molefe.

iii. Employees

Legal principle

In terms of section 41(2)(d) of the Companies Act, the approval of the shareholders of a company is
not required if the shares are issued pursuant to an employee share scheme that satisfies the
requirements of section 97 of the Companies Act.

Application of the legal principle

If the shares are issued to employees in terms of an employee share scheme which does satisfy the
requirements of section 97 of the Companies Act, then the shareholders of Abayomi Ltd will not be
required to approve the issue of the shares. However, if the requirements of section 97 of the
Companies Act are not satisfied, then the approval of the shareholders by special resolution will be
required.

Question (b) – The consequences of non-compliance

Legal principle

In terms of section 41(5) of the Companies Act 71 of 2008, a director of a company is liable for any
loss, damages or costs sustained by a company as a direct or indirect consequence of the director
having been present at a meeting or having participated in the making of such a decision by written
resolution and when such a director failed to vote against the issue of any shares despite knowing
that the issue of those shares was inconsistent with section 41.

Note that the provisions of section 77(3)(e)(ii) may also apply.

Application of legal principle

Thus in terms of section 41(5) of the Act, the directors of Abayomi Ltd will be personally liable for
any loss, damages or costs sustained by the company if they do not follow the correct procedures to
issue the shares.

Refer to paragraphs 5.4 and 5.4.2 of the study guide and paragraphs 9.5 and 9.6 of the prescribed
textbook.

Question (c) – Payment for the shares

In terms of section 40(1)(a) of the Companies Act 71 of 2008, the shares must be issued for adequate
consideration. The adequate consideration for the shares must be determined by the board of
directors before the company issues the shares.

General Subject Related Discussions : Study Unit 3: Duties of Directors

Question 1

It has been discovered that Amanda, the former managing director of Page (Pty) Ltd, allowed the
company to carry on its business while it was insolvent. This resulted in additional liabilities for the
company. Amanda is not concerned about personal liability as the company has indemnified him.
She also feels that as she is no longer a director of the company she cannot possible be held liable
for the loss. Advise Amanda, is she indemnified?

(10 marks)

Question 2

You are the legal advisor of Omega Ltd. The company has appointed two new directors Kate and
Samson. They have heard that directors may be held liable for loss incurred by companies. This
worries them. They are mainly concerned about the possibility of being held liable for failing to
exercise the required degree of care, skill and diligence but believe that the business judgement rule
may assist them. Advise Kate and Samson on what the business judgement rule entails.

(10 marks)

Regards Dr Bekink

(2018-07-30 15:52:19)

Discussion Forum: Learning unit 3

Question1:
Section 78 of the Companies Act, 2008 deals with indemnification and directors
insurance. Section 78 allows a company to take out indemnity insurance to


protect the director against any liability or expenses for which the company is
permitted to indemnify a director;
 protect itself against any expenses that the company is permitted to advance
to a director or for which the company is allowed to identify the director.
Note that indemnification and directors liability as provided for in section 78 applies to
current and former directors of companies.
A company may not indemnify a director in respect of liability arising out of certain
circumstances ( see sections 75, 76 and 77 of the Companies Act) such as a breach
of his or fiduciary duties. A company may also not indemnify a director, where the
director acquiesced in the carrying on of the company’s business in insolvent
circumstances while knowing that it was being so conducted.
Application:
As section 78 of the Companies Act applies to current and former directors it will also
apply to Amanda. Also, while a company may indemnify a director, it may not do so
where the director is carrying on the company’s business in insolvent circumstances
while knowing that it is being so conducted. Amanda will therefore not be able to rely
on the indemnity but will be personally liable for any loss damages or costs sustained
by the company as a direct or indirect consequences of his conduct.

Question 2:
A director’s duty of care and skill has its origin in the common law. In Fisheries
Development Corporation of SA Ltd v Jorgensen [1980 (4) SA 156 (W)] the concepts
of care and skill were examined. The court held as follows:
i. The required degree of care and skill to a large degree depends on the nature
of the company’s business and the specific duties assigned to the director. A
distinction must be drawn between executive and nonexecutive directors in the
sense that a nonexecutive director is not expected to give continuous attention
to the affairs of the company.
 ii. It is not expected of a director to have special expertise or experience. What is
expected is that the director exercises the degree of skill and care one could
reasonable expect from a person with his or her knowledge and experience.
Directors are not liable for mere errors of judgment.

iii. A director may rely on other officials and management unless there are
reasons for questioning the judgment of such officials or management. A
director must however still give due regard and exercise his or her own
judgment in doing so.
Remedies against a breach of the duty of care and skill may be based on contract if a
contract was concluded between the company and the director. Alternatively, a
delictual claim for damages exists. In order to claim for delict, obviously all the
requirements must be proven.
Section 76 of the Companies Act of 2008 has partially codified the duty of care and
skill and provides that the director must exercise that degree of care, skill and diligence
that may reasonable be expected of a person carrying out the same functions in
relation to the company as those carried out by the director.
An objective test is applied to determine what a reasonable director would have done
in the same situation. An objective test applied contains subjective elements in that
the general knowledge, skill and experience of that particular director in question are
taken into consideration. Therefore, the Act adopts a dual test.
In terms of the new Act, a statutory business judgment rule section 76(4) of the
Companies Act 71 of 2008 is also accepted. This provision states that a director will
be regarded as having acted in the best interest of the company and with the required
degree of care, skill and diligence if the director


had taken reasonably diligent steps to become informed about the matter;

had no personal financial interest in the matter;

made, or supported a decision in the belief that it was in the best interest of the
company;
 had a rational basis for believing that the decision was in the best interest of the
company
then his/her actions will be excused.

General Subject Related Discussions : Study Unit 4: Capacity and

representation of a company

Question

The Memorandum of Incorporation of ABC (Pty) Ltd states that the company’s business is restricted
to poultry farming. In an effort to expand the company’s business to game farming and breeding, on
behalf of ABC (Pty) Ltd the board of directors of ABC (Pty) Ltd purchases a kudu for R25 million from
Mark, a game breeder.
Discuss with reference to the Companies Act 71 of 2008 and the Memorandum of Incorporation of
ABC (Pty) Ltd, whether the contract for the purchase of the kudu from Mark is valid.

Samuel, one of the shareholders of ABC (Pty) Ltd, is unhappy about the purchase of such an
expensive kudu by the company. Assuming that the contract between ABC (Pty) Ltd and Mark for the
purchase of the kudu is valid, discuss whether Samuel has any claim for damages in this regard in
terms of the Companies Act 71 of 2008.

(2018-08-06 12:13:17)

Dear Students

We encourage you to participate in the discussion forum questions, as doing so will assist you with
your exam preparation. I have set out a guideline to the question on capacity and representation
below.

Question 1 - ANS

In terms of section 19(1)(b) of the Companies Act a company has the legal capacity and the powers
of a natural person, except to the extent that a juristic person is incapable of exercising any such
power, or the company’s Memorandum of Incorporation provides otherwise. Therefore, the
capacity of a company is no longer limited by its main or ancillary objects or business. A transaction
is not void merely because it is prohibited or restricted in terms of its Memorandum of
Incorporation. The fact that the company is restricted to poultry farming is therefore irrelevant.
Accordingly the contract for the purchase of the kudu from Mark is valid.

See further your Study Guide para 4.2 and your prescribed textbook at pages 134-138.

Question 2 -ANS

Even though an ultra vires transaction will be binding on the company, the shareholders are
provided with recourse to claim back their losses from the person who acted beyond the scope of
the company’s capacity.

Section 20(6) of the Companies Act provides that each shareholder has a claim for damages against
any person who intentionally, fraudulently, or due to gross negligence, causes the company to do
anything inconsistent with the Companies Act or a limitation, restriction or qualification on the
powers of the company as stated in its Memorandum of Incorporation, unless that action has been
ratified by special resolution in terms of section 20(2).

The purchase of the kudu is in contravention of the Memorandum of Incorporation of the company.
It has not been ratified by special resolution of the shareholders. Therefore Samuel will have a
potential claim for damages if he can successfully prove that the company intentionally or due to
gross negligence purchased the kudu from Mark.

See further your Study Guide para 4.2 and your prescribed textbook at pages 140-141.

(2018-08-13 11:31:05)

Mr SN MAKHUBU
General Subject Related Discussions : Learning Unit 5: Corporate Finance:
shares, debentures and public offerings
Good afternoon Ladies and Gentlemen,

Please study learning unit 5 and attempt to answer the question below.

Please when you answer the question, ensure that you identify the problem, explain the applicable
principle/theory and case law if any, apply the theory to the facts and conclude. PLEASE BE
DETAILED.

Question

The board of directors of CISC (Pty) Ltd has resolved to award 3% shares instead of R200 000.00
payment of dividends to the six shareholders of the company. The board thinks that this will increase
the capital of the company, as the company needs more cash to purchase new machinery for
production. The board of directors approaches you for advice.

Advise the board of directors fully on whether such a transaction is permitted in terms of the
Companies Act 71 of 2008, what should happen if one of the shareholders prefers to be paid cash
instead of being awarded shares and provide the prerequisites, if any, of paying cash instead of
awarding shares.
(10)

Thanks very much.

(2018-08-14 15:53:57)

Memorandum for learning unit 5

I would advise the board that:

Theory/application

Section 47 (1) Pof the Companies Act 71 of 2008, provides that subject to the MOI,

 The board of directors of the company may with a resolution approve the issue of shares pro
rata to shareholders instead of paying cash.

 Shares of one class may be used as capitalisation shares in respect of shares of another class.

 Subject to compliance with section 46 of the Act, the board of directors when resolving to
award capitalisation shares, may at the same time resolve to permit any shareholder who is
entitled to the award to elect to instead of capitalisation share to receive cash payment
determined by the board.

 Section 47(2) of the Act provides that the board of directors cannot authorise payment of
cash unless it considered the solvency and liquidity test and it is satisfied that the company
has complied with solvency and liquidity.

Yes, the transaction is permitted subject to compliance with the aforementioned requirements.
Secondly, subject to compliance with section 46 of the Act, the board may permit a shareholder who
is entitled to the award to choose instead of capitalisation shares to be paid cash.

Prerequisites of paying cash instead of capitalisation shares.

In terms of section 46 (1) Pof the Act, a company can make a distribution unless:
  The board by resolution has authorised the distribution.

 It reasonably appears that the company will satisfy solvency and liquidity test immediately
after completing the proposed transaction.

 The board of the company by resolution has acknowledged that it has applied solvency and
liquidity test as provided in section 4

 and reasonably concluded that the company will satisfy solvency and liquidity test
immediately after completing the proposed distribution.

The board must comply with the aforementioned requirements before paying cash to
shareholders.

Maximum 10

See the prescribed textbook section 9.7 and section 47 and 46 of the Companies Act 71 of the
Companies Act 71 of 2008.

(2018-08-22 17:59:10)

General Subject Related Discussions : Learning unit 6: Capital maintenance

Ms R CASSIM

ABC (Pty) Ltd is a company that specialises in mining. Nozi, an existing shareholder and employee of
the company wants to purchase more shares in the company. She however does not have sufficient
funds, but she offers to sell her vintage crockery collection to the company for R5 million. She will
then use the money from the sale of her vintage crockery collection to purchase more shares in ABC
(Pty) Ltd.

1. Advise ABC (Pty) Ltd on whether the purchase of Nozi’s art collection would qualify as financial
assistance in connection with the purchase of its shares. Refer to relevant case law where applicable.

2. Assuming the purchase of the art collection qualifies as financial assistance, discuss the
requirements that must be satisfied in terms of the Companies Act 71 of 2008 for this transaction to
be validly executed. (2018-08-20 12:25:16)

Ms R CASSIM

ANSWER:

Dear Students
Remember to APPLY the legal principles to the facts given to you and to CONCLUDE your answer
with regard to the question asked of you. You must know the leading cases on financial assistance.

I have set out a guideline to the answer below:

Question 1

In answering the question, students must refer to section 44 of the Companies Act 71 of 2008.

In terms of section 44 of the Companies Act, the board may authorize the company to provide
financial assistance by way of a loan, guarantee, the provision of security or otherwise to any person
for the purpose of, or in connection with, the subscription of any option, or any securities, issued or
to be issued by the company.

The transaction in the facts above is not a loan, guarantee or security. It may still constitute financial
assistance as the transaction may fall within ambit of ‘…or otherwise to any person for the purpose
of, or in connection with,…’

In order to determine whether financial assistance is given the courts have developed various tests:-

It must be ascertained whether the intended transaction qualifies as financial assistance. To

determine this, the impoverishment test as formulated in the case of Gradwell (Pty) Ltd v Rostra
Printers Ltd 1959 (4) SA 419 (A) should be relied upon to determine whether or not financial
assistance was provided.

The impoverishment test considers whether a transaction will have the effect of leaving the
company poorer, and if so, then financial assistance was provided.

In Lipschitz NO v UDC Bank Ltd 1979 (1) SA 789 (A) the court held that if the company buys an asset
from a person in order to enable that person to buy shares in the company, it will depend on the
facts whether this constitutes financial assistance.

Factors that have emerged from case law to assist in this regard are:

whether the company needs the asset in its normal business and

whether the company paid a fair price for it.

It is clear that the business of ABC (Pty) Ltd is to design diamond rings. Arguably, the company does
not require Nozi’s vintage crockery collection in its normal business. Arguably the company did not
pay a fair price for it, but this is debatable. The purchase of those assets would arguably constitute
financial assistance in connection with the purchase of its shares and the company would need to
comply with section 44 of the Companies Act 71 of 2008.
It is not enough to just state the legal principles, but you must apply them to the facts given to you
and conclude your answer.

Question 2

You must refer to section 44 of the Companies Act 71 of 2008 in answering this question.

Section 44 of the Companies Act 71 of 2008 sets out the requirements to be complied with when a
company provides financial assistance for the purchase of its securities. The requirements are:

The board must authorize the company to provide financial assistance to any person for the
purchase of any securities of the company.

The provision of financial assistance must be pursuant to an employee share scheme that satisfies
the requirements of section 97; or the provision of financial assistance must be pursuant to a special
resolution of the shareholders, adopted within the previous two years, which approved such
assistance either for the specific recipient or generally for a category of potential recipients, and the
specific recipient falls within that category.

The board must be satisfied that immediately after providing the financial assistance, the company
would satisfy the solvency and liquidity test and that the terms under which the financial assistance
is proposed to be given are fair and reasonable to the company.

The board must ensure that any conditions or restrictions regarding the granting of financial
assistance set out in the company’s MOI have been satisfied.

General Subject Related Discussions : Learning unit 7: Groups of companies

MAKHUBU

Learning unit 7 Groups of companies

Discussion forum question

Please study the learning unit and attempt to answer the questions below

Question 1

1.1 Lucky Biscuits (Pty) Ltd holds 31% of voting shares at True Biscuits (Pty) Ltd, while Fruitiful
(Pty) Ltd holds 19% of voting shares at True Biscuits (Pty) Ltd. Zirr (Pty) Ltd holds 53% of voting
shares at Lucky Biscuits (Pty) Ltd and 51% of voting shares at Fruitiful (Pty) Ltd.
Explain what groups of companies, holding companies and subsidiary companies mean and with
reasons explain whether Lucky Biscuits (Pty) Ltd, Fruitiful (Pty) Ltd and Zirr (Pty) Ltd are holding
companies of True Biscuits (Pty) Ltd.
[10]

1.2 Explain Five legal consequences for group companies. [5]

End of question

(2018-08-28 18:32:16)

Mr SN MAKHUBU

Memorandum for learning unit 7 question

The meaning of group companies, holding and subsidiary companies

Group companies mean that two or more companies are related. This happens when one company
directly or indirectly controls another company. The key factor is control.
(2)

Holding company mean or referrers to a company that controls directly or indirectly the majority
(51% or more) of the voting rights in the general meeting of the company or the in the board
meeting of the company. (1)

Subsidiary company mean or referrers to a company that its general meeting or board meeting is
indirectly or directly controlled by the holding company. (1)

Whether Lucky Biscuits (Pty) Ltd, Fruitiful (Pty) Ltd and Zirr (Pty) Ltd are holding companies of True
Biscuits (Pty) Ltd.

Lucky Biscuits (Pty) Ltd is not a holding company True Biscuits (Pty) Ltd as it holds less 51% of shares.
(2)

Fruitiful (Pty) Ltd is not a holding company of True Biscuits (Pty) Ltd as it holds less than 51% of the
shares. (2)

Zirr (Pty) Ltd holds the required majority at Lucky Biscuits and Fruitful; this makes it the holding
company of Lucky Biscuits and Fruitful. However, the combined control by Lucky Biscuits and
Fruitiful is less than 51% at True Biscuits. This means that the Zirr is unable to indirectly exercise
control through its subsidiaries at True Biscuits. It thus not a holding company of True Biscuits.
(2)

Section 1 and 3 of the Companies Act 71 of the Act, part 8 of the textbook and learning unit 7 of the
study guide.
1.2 Explain Five legal consequences for group companies.

See the legal consequences on part 8.1 and 8.3 of the textbook and page 39 – 40 of the study guide.

Make sure that you understand the legal consequences and the reasons why the legislature
prescribes them.

(2018-09-03 11:44:01)

General Subject Related Discussions : Learning Unit 8 - Fundamental and

Affected Transactions - Week Starting 3 September 2018

Mr WJC SWART

Development Properties (Pty) Ltd owns an office building in Johannesburg valued by its auditors in
the previous financial year at R18 million and two buildings in Cape Town valued at R4 million and R5
million respectively.

The board of directors decided that they should focus on acquiring more properties in Cape Town.
Since the company has received an offer of R20 million for the building in Johannesburg, the
directors want to accept the offer. The board regards the decision to sell the property as a
management decision that they can take on their own, but one of the shareholders disagrees.

Question 1

With reference to the Companies Act 71 of 2008, fully advise the board whether they may contract
to sell the Johannesburg property without involving the shareholders of the company, and whether
they need to comply with any specific statutory requirements.

Question 2

Two shareholders of the company who are unhappy about the proposed sale of the Johannesburg
property, have indicated that if the sale goes ahead, they will no longer be interested in owning
shares in the company and that they will expect the company to buy their shares. The directors of
Development Properties (Pty) Ltd want to know if these shareholders can force the company to buy
their shares. With reference to the Companies Act 71 of 2008, advise the directors whether these
two shareholders may force Development Properties (Pty) Ltd to buy their shares.

(2018-08-30 16:37:48)

Mr WJC SWART

Question 1

First you had to recognise that the company is disposing of a major asset.

The value of the asset is more than 50% of its gross assets fairly valued, irrespective of its liabilities.

Therefore the transaction is a fundamental transaction because the company is dispose of all or the
greater part of its assets or undertaking.

“All or the greater part of the assets” is defined in section 1 of the Companies Act 71 of 2008 as
meaning more than 50% of its gross assets fairly valued, irrespective of its liabilities.
The valuation of the Johannesburg building is more than the combined value of the two buildings in
Cape Town.

Therefore, if the company sells the Johannesburg building it will be selling more than 50% of its gross
assets.

R18mil (JHB office) + R4mil (Cape Town building) + R5mil (Cape Town building) = R27mil

R18mil (value of the JHB office) / R27mil (total assets of the company) x 100

66.67% of the total assets of the company (greater part or more than 50% of the total asset value).

The relevant provisions of the Companies Act are sections 112 and 115.

If a company wants to dispose of all or the greater part of its assets or undertaking, the transaction
must be approved by a special resolution of the shareholders.

The assets must be valued as at the date of the proposal.

Therefore the shareholders must be involved in the transaction because the transaction must be
approved by a special resolution of the shareholders.

The special resolution must be taken at a meeting specially convened for this purpose.

A quorum of 25% of all the voting rights that are entitled to be exercised on the special resolution
must be present at the meeting, or any higher percentage required by the company’s Memorandum
of Incorporation.

The notice of the meeting must include a written summary of the precise terms of the intended
transaction.

Something to think about: How would your answer differ if Development Properties (Pty) Ltd was a
public company? Would the transaction then have been regulated differently?

Question 2

A proposed fundamental transaction is one of the triggering actions for the appraisal remedy.

This remedy entails that a dissenting shareholder must send the company a written notice of his
objection to the resolution. The written notice must be sent to the company before the resolution is
voted upon.

The dissenting shareholder must be present at the meeting and he must vote against the special
resolution.

Accordingly, if the two shareholders who are unhappy about the sale of the Johannesburg property
follow the prescribed procedure, the company will be compelled to acquire their shares at fair value.

See specifically section 164 of the Companies Act 71 of 2008

(2018-09-07 11:38:11)

General Subject Related Discussions : Learning unit 9: Business Rescue

Proceedings
Question

Answer the following questions:

i. Discuss the circumstances and the procedure under which the board of directors of a compa
company under voluntarily business rescue
ii. Discuss whether the approval of the shareholders must be obtained and whether a court ord
place a company under voluntary business rescue.

(2018-09-20 16:08:52)

Guideline to the answer

i. In terms of section 129 of the Companies Act the board of the company must
pass a board resolution to place the company under business rescue.

The company may be placed under business rescue by the board only if the board has
reasonable grounds to believe that the company is financially distressed and there
appears to be reasonable prospects of rescuing the company.

Financial distress means that:

It appears to be reasonably unlikely that the company will be able to pay all of its debts
as they become due and payable within the next ensuing six months; or it appears to be
reasonable likely that the company will become insolvent within the immediately ensuing
six months.

The board resolution must be passed by a majority vote of the board of directors.

The resolution may not be adopted if liquidation proceedings have been initiated by or
against the company.

The resolution has no force or effect until it has been filed with the Companies and
Intellectual Property Commission.

Within 5 days of filing the board resolution the company must publish in the prescribed
manner a notice of the resolution and its effective date to every affected person together
with a sworn statement of the facts relevant to the grounds for the board resolution.

ii. The approval of the shareholders is not required in order for the board to
voluntarily place the company under business rescue. A court application is also
not required for the board to place the company under business rescue.

General Subject Related Discussions : Learning Unit 10 Compromises

Learning Unit 10
Scubaria Ltd is experiencing serious financial problems. Scubaria’s board of directors has agreed to a
restructuring of the company’s shareholding by consolidating the preference and ordinary shares
held by shareholders. In order to ward off liquidation of the company, the board of directors has also
held meetings with several of the company’s creditors to find out whether they would be willing to
write off portions of their claims against the company or, at least, to postpone the date of payment.
The majority of the creditors are willing to assist the Scubaria Ltd in this way, but a few creditors
insist on payment in accordance with the agreements concluded between them and the company.

Answer the following questions with reference to the set of facts:

1. Explain whether or not the proposed arrangements, ie between the company and the
shareholders and the company and the creditors, are regulated under the same provision of
the Companies Act 71 of 2008. (3)

2. What are the main differences between the procedure in terms of section 311 of the
Companies Act 61 of 1973 and the procedure in section 155 of the Companies Act 71 of
2008? (5)

3. Must the scheme of compromise in terms of the Companies Act 71 of 2008 be implemented
against all the creditors, or may some be excluded from its
operation? (2)

4. Is it a requirement that all of the creditors must agree to the

compromise? (2)

5. Would the company have to apply to the High Court before the compromise is proposed to
the creditors? (3)

6. What information must be contained in the compromise proposal? (10)

7. When will a compromise proposal be adopted and

binding? (5)

Scubaria Ltd is experiencing serious financial problems. Scubaria’s board of directors has agreed to a
restructuring of the company’s shareholding by consolidating the preference and ordinary shares
held by shareholders. In order to ward off liquidation of the company, the board of directors has also
held meetings with several of the company’s creditors to find out whether they would be willing to
write off portions of their claims against the company or, at least, to postpone the date of payment.
The majority of the creditors are willing to assist the Scubaria Ltd in this way, but a few creditors
insist on payment in accordance with the agreements concluded between them and the company.

Answer the following questions with reference to the set of facts:

1. Explain whether or not the proposed arrangements, ie between the company and the
shareholders and the company and the creditors, are regulated under the same provision of
the Companies Act 71 of 2008. (3)

No. The Companies Act 71 2008 separates schemes of arrangement between the company and
members and schemes of compromise with creditors. Schemes of arrangement in relation to a
company and its members are dealt with in section 114. Schemes of compromise (which can include
an agreement by creditors to write off a portion of their claims/ waive interest on claims or
postpone the payment date) is regulated by section 155 of the Companies Act 71 of 2008.
 2. What are the main differences between the procedure in terms of section 311 of the
Companies Act 61 of 1973 and the procedure in section 155 of the Companies Act 71 of
2008? (5)

The procedure under the Companies Act 61 of 1973 applies only in instances where the company is
in financial distress, whereas this is not in terms of the Companies Act 71 of 2008 a requirement.

Unlike the provisions in the Companies Act 61 of 1973, section 155 (3) codifies and sets out in some
detail what information must be included in the proposal.

In terms of the Companies Act 71 of 2008 it is not required as it is in terms of section 311 of the
Companies Act 61 of 1973, to apply for leave to the High Court before making a proposal of a
compromise to creditors.

3. Must the scheme of compromise in terms of the Companies Act 71 of 2008 be implemented
against all the creditors, or may some be excluded from its
operation? (2)

No. Schemes of compromise can relate to all three classes of creditors (preferent, secured and
concurrent) or only one class, leaving the other classes of creditors unaffected by the scheme.

4. Is it a requirement that all of the creditors must agree to the compromise? (2)

No, as long as a majority in number of the creditors, representing at least 75% in value of the claims
of the creditors, approve of the proposed compromise, the compromise will become binding on the
dissenting minority of creditors. The High Court has no discretion to scrutinize the fairness of the
proposal.

5. Would the company have to apply to the High Court before the compromise is proposed to
the creditors? (3)

In terms of the Companies Act 71 of 2008 it is not required to apply for leave to the High Court
before making a proposal of a compromise to creditors. As long as a majority in number of the
creditors, representing at least 75% in value of the claims of the creditors approve of the proposed
compromise, the compromise will become binding on the dissenting minority of creditors. The High
Court has no discretion to scrutinize the fairness of the proposal.

6. What information must be contained in the compromise proposal? (10)

Section 155(3) of the Companies Act 71 of 2008 codifies and sets out in some detail what
information must be included in the proposal. It contains an itemised list of the information which
must be contained in the proposal. One of these items is a statement as to whether or not the
proposal of the compromise includes any proposals made "informally" by a company creditor. What
the word "informally" means is unclear. It could mean that the drafter of the proposal needs to
include every single compromise of a claim by a single creditor in relation to their debt however
insignificant or irrelevant in relation to all the creditors. The list of information that must be
contained in a proposal further includes details of all the assets and creditors of the company, the
nature and extent of any proposed moratorium on claims, the treatment of ongoing contracts to
which the company is a party, the order of preference in which the proceeds of the property of the
company will be applied to pay creditors, any conditions precedent must be satisfied for the
proposal to come into operation and be implemented, the number of employees of the company
and their terms and conditions of employment, and a projected balance sheet and statement of
income and expenses for the ensuing three years. A proposal must be concluded with a certificate by
an authorised director or officer of the company stating that the factual information appearing
therein is accurate, complete and up to date and that the projections provided are estimates made
in good faith.

7. When will a compromise proposal be adopted and binding? (5)

Section 155(6) provides that

"A proposal .... will have been adopted by the creditors of the company .... if it is supported by a
majority in number representing at least 75% in value of the creditors or class, as a case may be,
present and voting in person or by proxy at the meeting called for that purpose".

Section codifies the common law requirement that a scheme of compromise must be approve by
75% of the creditors in number and in value in each affected class.

Section 155(7)(a) provides that a company "may" apply to court for an order approving the proposal.
This suggests that it is not necessary for the company to obtain the sanction of the High Court before
a compromise becomes binding on the dissenting creditors.

General Subject Related Discussions : Learning unit 11 Insider trading

Question 1

Sharon is a secretary for a large firm of attorneys. One morning Sharon overhears a conversation
between two of the firm's attorneys who represent Squire Foods Ltd, a listed company. Squire Foods
Ltd was summoned before the Competition Tribunal to answer to allegations of price fixing of
foodstuffs. Sharon can gather from the conversation between the attorneys that Squire Foods Ltd
will have no choice but to admit to the price fixing, which might mean that the company will have to
pay 10 per cent of their annual turnover to the Competition Commission. This will have a
detrimental effect on the share price of Squire Foods Ltd.

Sharon phones her friend, Sizwe, who is a stock broker. Sharon says the following to Sizwe: “Don’t
ask me how I know, but now is not a good time to have Squires Foods’ shares”. Sizwe immediately
sells all shares held in Squire Foods Ltd on behalf of his clients and he instructs all other clients not to
buy shares in the company.

Sharon also tells her girlfriend, Pam, what she has heard, but Pam does not act on the information.

Discuss which of these parties might incur criminal as well as civil liability for insider trading in
terms of the Securities Services Act 36 of 2004. [15]

You should have discussed inside information as well as who will be regarded as an insider and then
apply it to the scenario.

Information will qualify as inside information if:

it is specific or precise;
not made public;

obtained as an insider;

price sensitive (likely to materially influence the price if made public)

An insider is defined as someone who obtained inside information through being a director, an
employee or a shareholder of an issuer of securities or someone who has access to inside
information by virtue of his her employment, office of profession. As well as someone who acquired
inside information form a primary source (the secondary insider or the tippee).

Sharon is an insider due to her employment

Sizwe is probably an insider, because he at least had reason to suspect that the information came
from an insider.

Pam is an insider

Three possible offences set out:

Dealing on one’s own account or someone else

Encouraging/discouraging

And disclosing

Application:

Only civilly liable if a profit was made/loss avoided.

Sharon discouraged Sizwe from dealing. Only encouragement leads to civil liability. Sharon would be
guilty of the offence, but not civilly liable for the loss avoided through Sizwe’s dealing. Sharon can
also be criminally liable based on the offence of disclosing information (to Sizwe).

Sizwe (as an insider) will be criminally liable for dealing (includes buying or selling) on behalf of his
clients by selling the shares. He incurs no civil liability for advising the clients not to buy shares in
Squire Foods Ltd (abstinence).

Sharon is not civilly liable for disclosing the information to Pam, because Pam did not deal. But, she
is criminally liable for disclosing the information to Pam.

Pam is neither criminally liable, nor civilly liable, because she did not act on the advice.

General Subject Related Discussions : Learning Unit 12 Transformative

Constitutionalism

What African values comprises the concept of ubuntu?

1. The ability to show compassion

2. Social justice and fairness
3. harmony and humanity
4. Recognising the inter-connectedness of people and the accompanying responsibilities
 5. Integrity and ethical behaviour
6. Open channels of communications and transparency
7. Due process and sensitivity in dealings with one another and other similar values

What is meant by transformative constitutionalism?

Transformative constitutionalism is a long-term project of constitutional enactment, interpretation

and enforcement to transform the country’s political, legal and social institutions and power
relations in a democratic way. In short, it is the process of adaptation of the common law by infusion
of constitutional values

What does ‘Africanisation’ mean?

Renewing the focus on Africa and ensuring that teaching is adapted to African values, realities and
conditions. Africanisation aims to ensure that people in a particular context such as the community
or family in the case of traditional African societies maintain sound relationships tailored on
accommodating opposing views and conciliating competing interests.

Which stakeholders are recognised as being affected by corporate behaviour underlying the
concept of corporate social responsibility?

Stakeholders are persons who can affect or be affected by a business’s actions, objectives and
policies, including creditors, directors, employees, government (and its agencies), owners
(shareholders), suppliers, unions, and the community from which the business draws its resources.

Corporate governance is the system used to regulate and oversee corporate conduct to balance
stakeholders’ interests and the interests of others that may be influenced by the conduct, in order to
ensure responsible behaviour while ensuring the maximum level of efficiency and profitability for a
corporation.

Directors in performing their functions in companies must consider the interests of other
stakeholders such as the community and the environment in which the company that they serve,
functions.

Different persons are involved and affected by the commencement of the business rescue. One of
the purposes of the Companies Act is providing for the efficient rescue and recovery of the
financially distressed companies in a manner that balances the rights and interest of all relevant
stakeholders (section 7 (K) of the Companies Act). Business rescue proceedings recognise among
others, the interests of employees. This is the first time that stakeholders other than the shareholder
and company creditors have received direct protection in the Companies Act.

In what ways would corporate social responsibility be potentially beneficial to companies?

CSR may improve the company’s capability to generate sustainable value through mutually
beneficial relationships with their stakeholders. Various stakeholders such as community groups,
regulators and purchasing bodies will potentially favour socially responsible companies with
business opportunities and this may enhance the profit potential of such companies.

Socially responsible companies may benefit from preferential procurement and government
cooperation in terms of the Broad-Based Black Economic Empowerment policies in South Africa.

CSR may enhance the company’s reputation and differentiate it from its competitors. A good
reputation is a very valuable asset a company could have.

A company with a good social record, and which treats its employees with dignity, is likely to attract,
motivate and retain a productive, stable and loyal workforce.

Increasing employee satisfaction leads to better performance by employees and this will assist the
company to increase production, quality, reliability and profits.

How is corporate social responsibility reflected in the Companies Act?

The extensive corporate law reform process which culminated in the passing of the Companies Act
recognised the need for South African company law to be sensitive (amongst other things) to social
and ethical concerns.

One of the purposes of the Companies Act is to promote the development of the South African
economy by encouraging transparency and high standards of corporate governance, given the
significant role of enterprises within the social and economic life of the nation (s 7(b)(iii)). This
manifests a realisation that companies play a vital role not only in the economy, but in the social life
of the country as well.

The Companies Act specifically seeks to reaffirm the concept of the company as a means of
achieving economic and social benefits (s 7(d)).

The Companies Act seeks to promote the development of companies within all sectors of the
economy, and to encourage active participation in economic organisation, management and
productivity (s 7(f)).

The Companies Act also seeks to encourage the efficient and responsible management of companies
(s 7(j)). Sound management of companies may enhance corporate performance, lead to creation and
retention of jobs and helps to prevent corporate conduct that may have negative impacts on society.
It also prevents corporate collapses due to mismanagement that may also have dire consequences
on society.
The Companies Act provides for non-profit companies that are incorporated for social activities,
public benefits, cultural activities or group interests. The objects for which non-profit companies
may be registered may include prevention and education about HIV and AIDS, assistance of
refugees, protection of the environment and animal welfare or child welfare and protection.

Corporate activities may affect a wide circle of stakeholders. As such, the Companies Act has
extended locus standi to a broad category of stakeholders (not only company shareholders) to
enforce its provisions and to seek redress where company directors have abused their position, for
example, in the context of the derivative action (s 165) and application to declare a director
delinquent or under probation (s 162). Such stakeholders may include directors, prescribed officers,
trade unions or other representative of employees, persons who have been granted leave by the
court, the Commission or Takeover Regulation panel. Moreover, any person who contravenes any
provision of the Companies Act of 2008 is liable to any other person for any loss or damage suffered
by that person as a result of the contravention (s 218(2)).

The Companies Act requires certain categories of companies to appoint a Social and Ethics
Committee to monitor the company’s activities with regard to matters relating to social and
economic development (includes the company’s standing in terms of the goals and purposes of the
10 principles set out in the United Nations Global Compact Principles; the OECD recommendations
regarding corruption, the Employment Equity Act; and the Broad-Based Black Economic
Empowerment), good corporate citizenship (includes the company’s promotion of equality,
prevention of unfair discrimination reduction of corruption; contribution to development of the
communities in which the company’s activities are predominantly conducted or its products or
services are marketed; and recording of sponsorship, donations and charitable giving), the
environment, health and public safety, consumer relationships, and labour and employment issues
(s 72 and Regulation 43).

What is globalisation?

Globalisation refers to the integration of nations through the flows of goods, information, services
and capital. It is a process by which businesses develop international influence.

What are the main characteristics of the modern corporate world?

There is increased globalisation

• There is increased electronic communication

• There is increased sensitivity to social concerns, corporate governance and ethical concerns

• The markets are rapidly evolving

• There is greater competition for capital, goods and services

• There is an increase in international trade, foreign investment and mobility of international
capital.

In what ways does the Companies Act recognise globalisation?

One of the purposes of the Companies Act is to provide for the creation and use of companies, in a
manner that enhances the economic welfare of South Africa as a partner within the global economy
(s 7(e)). This manifests a realisation that South Africa is one of the participants in the wider global
economy. The harmonisation of South Africa’s corporate laws with the laws of other countries is,
therefore, essential.

The courts are allowed to consider foreign company law (to the extent appropriate) when
interpreting and applying the provisions of the Companies Act (s 5(2)).

The effects of decisions by English courts may be seen in a number of common law principles and
statutory provisions, for example, Salomon v Salomon, Royal British Bank v Turquand, Attorney-
General v Mersey Railway Company and Regal Hastings Ltd v Gulliver (See, for example, the
statutory version of the Turquand rule in section 20(7) of the Companies as well as the common law
and partially codified duties of company directors).

The influence of corporate laws of other modern jurisdictions such as the United States, United
Kingdom, New Zealand, Canada and Australia may be seen in a number of concepts, for example the
appraisal remedy (s 164); an objective duty of care, skill and diligence (s 76(3)(c). Note that this test
has some subjective elements); the business judgment rule (s 76(4); and the statutory derivative
action in terms of the Companies Act (s 165).

The provisions relating to appointment of proxies (s 58) and electronic communication at

shareholder meetings (s 63(2)) are a manifestation of greater sensitivities to globalisation.

The Companies Act provides for the registration of domesticated companies and external
companies.
The Companies Act seeks to provide for increased standards of corporate governance, shareholder
and investor protection (s 7). The purpose is to encourage both local and foreign investment in order
to stimulate economic growth in South Africa.

What does the audi alteram partem rule entail?

One of the rules of natural justice is the audi alteram partem-rule. This principle means that before
any judicial functionary takes a decision on a matter, both sides of the story must be heard. It
originates from the natural desire of man to be fair to his fellow human beings.

What does corporate social responsibility entail?

Corporate social responsibility seeks to make today’s companies responsible members of the
community. The term CSR is generally understood to mean integrating economic, social and
environmental imperatives into the company’s activities while at the same time addressing
shareholder and stakeholder expectations. It is premised on the idea that the modern company has
a wide and diverse range of stakeholders, that is, both business and socio-economic stakeholders.

Explain whether it is possible to enforce the principles of ubuntu and the constitutional principles in
a court of law.

Yes, it is. This can be done either directly or indirectly. In Everfresh Market Virginia (Pty) Ltd v
Shoprite Checkers (Pty) Ltd 2012 (1) SA 256 (CC) the court considered whether the common law
should be developed to require that parties to a contract should be legally required to contract with
each other in good faith and on reasonable terms. The respondent argued that good faith is too
vague a concept to enforce. The court disagreed. The court paid regard to the fact that the
development of the South African economy and contract law have been shaped predominantly by
colonial legal tradition founded in English, Roman law and Roman Dutch law. The common law of
contract regulates the environment within which trade and commerce take place. Its development
must take into account the values of the vast majority of people who can after democratisation of
the country participate in trade and commerce. The court commented that the majority of South
Africans places a higher value on negotiating in good faith than would have prevailed under colonial
legal tradition. In Mohamed’s Leisure Holdings (Pty) Ltd, counsel for the respondent, albeit in the
alternative, had raised and argued on the basis of ubuntu and fairness. The court recognised ‘the
desirability and necessity of infusing the law of contract with constitutional values’.

Explain the test that is used by the court to determine whether it is necessary to develop the
common law.

In deciding whether the common law must be developed, the court must in each case determine
whether the common law fails to give effect to the section 39(2) objectives, and if so, the court must
decide what development would appropriately address the shortcomings (Everfresh Market Virginia
(Pty) Ltd v Shoprite Checkers (Pty) Ltd par 30).
ACTIVITY

Access the recent case of Mohamed’s Leisure Holdings (Pty) Ltd v Southern Sun Hotel Interests
(Pty) Ltd 2017 (4) SA 243 (GJ). (Note: This case is also placed under Additional Resources for your
convenience). Answer the following questions:

Identify the constitutional rights that the court consider in deciding whether the lease agreement
is enforceable.

Sections 34 (access to justice) and 39 (duty to develop the common law) of the Constitution of the
Republic of South Africa, 1996

What factors did the court consider or what test did the court apply in order to make its
determination?

The court in this type of assessment must make a value judgment based on constitutional rights and
values. This must be done in a manner which is objective, taking into consideration the facts of the
particular matter, and the various values and constitutional principles. Finally, the court must decide
what needs to be done to address the identified problem. The rights of the respective parties and
the prejudice that they could suffer must also be weighed up. Having done so, the court concluded
that ‘[a]pplying the value of ubuntu, “carrying with it the ideas of humaneness, social justice and
fairness to the facts of this matter’ that implementing the eviction of the respondent would offend
the Constitution’s values. Therefore, the application failed.

Is this an example of a direct/ indirect application of the constitutional values to enforce rights?

Counsel for the respondent, albeit in the alternative, had raised the concepts of ubuntu and fairness.
However, ultimately both parties proceeded to argue exclusively on these grounds. So, direct.

Subject LML4806 EXAM

Saved By R CASSIM

Modified Date 01-Oct-2018 12:35

Groups site

Message

Dear Students

This announcement relates to the upcoming exam for LML4806.

1. Congratulations to those of you who did well in your assignments for LML4806, particularly to those
of you who achieved distinctions for both assignments. The Tutorial Letter setting out guidance on the
assignments was released on myUnisa in September. Please review it if you have not done so yet.

2. We also refer you to our announcement of 25 July 2018 in which we set out additional guidance on
answering application type questions.

3. We are disappointed to note that the participation in the online discussion forum questions is very
low this semester. These questions are intended to assist you to answer typical exam questions. Some
of you have posted general questions on the discussion forums after the answer had been posted by
the lecturer. If you have specific questions on the course material, please e-mail them directly to the
relevant lecturer who posted the question on that learning unit. If you are unable to view the discussion
forum questions from learning unit 6 onwards, please refer to the announcement which we posted on
20 August 2018 advising you how to view all the discussion forum questions.

4. In preparing for your exam, we encourage you to review the discussion forum questions, your
assignment questions and past exam papers and to practise answering these questions so that you
familiarise yourself with the type of questions you will encounter in the exam, the length of the paper
and how to apply the law to the facts in answering exam questions. You must ensure that you read the
Companies Act 71 of 2008 itself, your Study Guide, and your prescribed textbook, The Law of Business
Structures. You are required to study ALL the study units for the LML4806 exam. It is not sufficient to
rely only on past exam papers. The textbook serves to supplement the Study Guide and explains and
expands on the concepts in the Companies Act 71 of 2008 and the Study Guide. You will gain a much
better understanding of the company law concepts if you read the Companies Act 71 of 2008 itself
together with the Study Guide and the prescribed textbook.

5. You must read the actual sections of the Companies Act 71 of 2008 while you are studying so that
you familiarise yourself with the relevant provisions of the Act while you are studying. You do not want
to put yourself in a position where you waste time in the exam paging through the Companies Act and
looking for the sections of the Companies Act which are relevant to the question. The Companies Act
should be with you in the exam venue to be used merely as a guide. The exam is generally a lengthy
exam comprising application type questions and you will be expected to APPLY the relevant sections
of the Companies Act 71 of 2008 to the application type questions given to you. You must know your
work well, plan your answers and use your time in the exam wisely.

6. As we have stated previously, you may bring ANY edition of the Juta’s Pocket Statutes of the
Companies Act 71 of 2008 into the exam venue with you, or any edition of the LexisNexis version of
the Companies Act 71 of 2008. The book may not have notes, markings, post-its, flags or highlights in
it. The book must be a clean copy. You may not bring a print-out of the Companies Act into the exam
venue with you.

7. We caution you to ensure that in your exam you focus on the core question asked of you. If you do
not do this, you will waste time in your exam, you may not complete the paper and you will not obtain a
good result. You will not be awarded marks in your exam if you write on ancillary matters which are not
relevant to the question asked of you.

8. You must ensure that you number your questions in the exam properly. You can answer the questions
in any order you wish, but do not separate subquestions. Keep the answers to subquestions together.

We wish you all the best for your upcoming exam.

Regards

Your lecturers