UNIVERSITY EXAMINATIONS

AUGUST 2023

LML4806

COMPANY LAW
100 marks

Duration 24 Hours

CONFIDENTIAL
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This paper consists of 6 (six) pages.

INSTRUCTIONS FOR A PORTFOLIO OR TAKE-HOME EXAM

PLEASE READ THE FOLLOWING INSTRUCTIONS CAREFULLY BEFORE ANSWERING THE

EXAMINATION QUESTIONS.
Instructions:

1. The examination question paper counts 100 marks.

2. The examination consists of FOUR questions. You should answer ALL the questions.
3. The duration of the examination is 24 hours.
4. It is an open-book examination. You may consult your prescribed study material during the examination.
5. The examination is not proctored (or invigilated).
6. Your exam answer file must be emailed to Dr V Madlela: madlev@unisa.ac.za and Dr DM Mahhumane:
mahhudm@unisa.ac.za on or before Friday 25 August 2023 at 14:00 pm (South African Standard Time).
6.1 You are advised to preview your submission (answer script) to ensure legibility and that the correct answer
script file has been emailed.
6.2 Submissions made after the submission period has lapsed will be rejected per the examination regulations
and will not be marked.
7. The cover page for your take-home exam must include your name, student number and the module code.
8. It is preferred that your take-home exam is typed. However, handwritten submissions will also be accepted.
9. Whether your answers are typed or handwritten, your emailed submission must be made in the form of
one PDF document. Only the last file submitted on time will be marked.
9.1 The exam answer file that you submit must not be password protected or submitted as a “read only” file.
9.2 Your examination answer file will not be marked if:
9.2.1 you submit the incorrect examination answer file. A mark of 0% will be awarded.
9.2.2 you submit your examination answer file in the incorrect file format.
9.2.3 you submit a password-protected document.
9.2.4 you submit your examination answer file late
9.2.5 you submit your answer file from a registered student account that is not your own.
9.3 The mark awarded for an illegible examination answer file submission will be your final mark. You will not
be allowed to resubmit after the scheduled closing date and time of the exam.
9.4 The maximum mark awarded is 50%.
10. If your answers are typed, ensure that the following requirements are adhered to. Items 10.3-10.6 applies
to written assignments as well.
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August FI Concession Exam 2023

10.1 The text must be typed in Arial font, size 12 with single line spacing within the paragraph, and double line
spacing after the paragraph.
10.2 The text must be justified.
10.3 All of the pages must be numbered in the right hand corner at the bottom of the page.
10.4 All margins must be 2.5cm, but the left margin must be 3cm.
10.5 South African English and not American English should be used. For example, the correct spelling is
“Labour” and not “Labor”.
10.6 Do not use abbreviations or SMS language.
10.7 All quotes that are two lines long (or less), must form part of the main text, be written in italics, and be
bracketed by quotation marks. Where a quotation is longer than two lines, it must be typed in a separate
paragraph in italics in size 11 font and must be indented by 1 cm. No quotation marks are required when
the quotations stand alone. Use quotations very sparingly. In this take-home exam, a maximum of 5% of
the text may be quoted.
11. When answering the take-home exam questions, remember that an open-book exam is a test at a higher
level than the usual type of exam, where memory is tested as much as insight.
11.1 Also, because you have the textbook, study guide and Acts available when answering questions, we do
not give marks for direct quotations from the guide. You are therefore assessed on your level of
understanding of the legal principles by looking at how well you summarised and stated the relevant legal
principles as well as applied the principles to the questions.
11.2 PLEASE DO NOT CUT AND PASTE ANSWERS FROM THE STUDY GUIDE, TEXTBOOK OR THE ACT
(OR ANY OTHER SOURCE).
12. The arguments that you make must be logical, well-structured and substantiated by all of the relevant legal
principles. You are given 24 hours to complete the take-home exam. You should use the time given wisely.
12.1 Ensure that you give reasons for each answer. Substantiate your answers by referring to ALL of the
relevant authorities, e.g. sections from relevant legislation and/or court cases in the text or in your
footnotes.
12.2 A number of students lose marks because they do not approach problem-type questions correctly. When
answering such questions, it is important to first clarify for yourself the area of work where the answer must
be sought. Once you have done this, set out the relevant legal principles. Deal only with those principles
that relate to the given facts. Next, apply these principles to the facts. This is where most of the students
lose marks - they set out the law in some detail, but then do not illustrate how it applies to the factual
situation they have been asked to solve. Finally, state your conclusion.
13. You must complete the attached declaration of own work when submitting.
13.1 By the Honesty Declaration, you confirm that you have read (i) the University’s Policy on Copyright
Infringement and Plagiarism and the Student Disciplinary Code, which are both available on
myUnisa: www.unisa.ac.za/unisarules, and (ii) the information relating to student values and plagiarism
that is found at https://www.unisa.ac.za/sites/myunisa/default/Study-@-Unisa/Student-values-and-rules.
13.2 Students suspected of dishonest conduct during the examinations will be subjected to disciplinary
processes. Students may not communicate with other students, or request assistance from other students
during examinations. Plagiarism is a violation of academic integrity, and students who do plagiarise or
copy verbatim from published work will be in violation of the Policy on Academic Integrity and the Student
Disciplinary Code and may be referred to disciplinary hearing. Unisa has a zero tolerance for plagiarism
and/or any other forms of academic dishonesty.

PLEASE NOTE:

Students experiencing technical challenges may contact the SCSC on 080 000 1870 or email
Examenquiries@unisa.ac.za or refer to Get-Help for the list of additional contact numbers.
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August FI Concession Exam 2023

QUESTION 1 [25]

1.1 The Memorandum of Incorporation of Furnitureland Ltd (“the Company”) states that the purpose
of the Company is to deal exclusively in furniture. The Memorandum of Incorporation of the
Company specifically prohibits the Company from dealing in any other business that is not
related to the manufacture and distribution of furniture. Edith, one of the Company’s directors,
is authorised by the board of directors to conclude contracts on behalf of the Company. Edith
(acting on behalf of the Company) enters into a contract with Electronics (Pty) Ltd for the
purchase of laptops. The board of directors of the Company believes that these laptops are
popular and profitable.

In reply to a letter, in which a demand for the payment of the laptops is made by Electronics
(Pty) Ltd, the Company raises the defence that the contract between the Company and
Electronics (Pty) Ltd is void because the Company’s business is limited by its Memorandum of
Incorporation to trading in furniture.

With reference to appropriate sources:

1.1.1 Explain whether the contract between Furnitureland Ltd and Electronics (Pty) Ltd would
be valid and enforceable. (5)

1.1.2 Explain whether Furnitureland Ltd or the shareholders of Furnitureland Ltd can hold the
board of directors personally liable, on any basis, for the conclusion of the contract with
Electronics (Pty) Ltd. (5)

1.2 David holds 40% of the shares and voting rights in SLM (Pty) Ltd (“the Company”). The
Company’s Memorandum of Incorporation does not contain any special provisions regarding
the issue of shares other than that the Companies Act 71 of 2008 shall regulate any issue of
shares. The board of directors has resolved that the Company will issue 4 million of its
authorised shares for cash. David wants to subscribe for all the shares that the board of directors
has resolved to issue. None of the other existing shareholders of the Company want to subscribe
for any of these shares. However, the board of directors has negotiated an agreement with
Always On Investments (Pty) Ltd, which is currently not a shareholder of the Company and
which is not related to the Company. In terms of the agreement, Always On Investments (Pty)
Ltd will subscribe for up to 60% of the shares resolved to be issued. The agreement also
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August FI Concession Exam 2023

provides that the consideration for the shares will be paid for by a loan obtained by Always On
Investments (Pty) Ltd from Sharevest Bank Ltd and the Company will stand surety for this loan.

1.2.1 With reference to the relevant provisions of the Companies Act 71 of 2008, advise David whether
he will be able to compel the board of directors of SLM (Pty) Ltd to issue all the 4 million new
shares to him. (5)

1.2.2 Critically discuss the requirements of the Companies Act 71 of 2008 that must be complied with
for SLM (Pty) Ltd’s agreement to stand surety for the loan to be obtained by Always On
Investments (Pty) Ltd from Sharevest Bank Ltd to be valid. Also explain whether David may be
able to prevent this agreement from becoming operative. (10)

QUESTION 2 [25]

2.1 Bobsleigh Logistics Ltd will be holding its annual general meeting (AGM) next month. Some of
the company’s shareholders will not be able to attend the AGM in person at the time it is to be
held, although they would want to participate at the AGM and to vote on the resolutions that will
be tabled for shareholder vote.

Discuss the possibility of allowing the shareholders who will not be able to attend the AGM in
person to attend and participate at the AGM electronically, and indicate whether there would be
any requirements that must be complied with. (5)

2.2 Fully discuss the appointment, composition and functions of audit committees within companies.
(20)

QUESTION 3 [25]

3.1 The only assets of ASX Properties Ltd are a shopping centre in Durban valued by the company’s
auditors in the previous financial year at R6 billion and two warehouses in Richards Bay valued
at R800 million and R2.5 billion respectively. The board of directors decided that they should
focus on acquiring more warehouses in Richards Bay due to the increasing demand for storage
of import and export cargo. The company has received an offer of R6.3 billion for the shopping
centre in Durban and the directors want to accept the offer. The directors are of the view that
the decision to sell the shopping center is a management decision that they can take on their
own, without involving the shareholders of the company.
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3.1.1 With reference to appropriate sources, fully advise the directors of ASX Properties Ltd
whether they may sell the shopping centre in Durban without involving the shareholders
of the company, and whether they need to comply with any specific statutory
requirements. (10)

3.1.2 Two shareholders of ASX Properties Ltd are unhappy about the proposed sale of the
Durban shopping centre. These two shareholders 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 ASX Properties Ltd want to
know whether these shareholders can force the company to buy their shares. Advise the
directors whether these two shareholders may force ASX Properties Ltd to buy their
shares. (5)

3.2 Infinity Workspace Ltd specialises in the rental of office space. The current difficult economic
conditions have resulted in many office tenants defaulting on their rental payments to the
company. For the past six months, the company has been receiving as little as 50% to 60% of
its major tenants’ rent. This has caused cash flow problems for the company, which is now
struggling to pay its own creditors and some of these creditors have already started instituting
legal actions against the company. However, the board of directors of Infinity Workspace Ltd
expects that the company’s cash flow will improve and that the company will return to profitability
once the economic conditions improve in the near future.

With reference to appropriate sources, advise the board of directors of Infinity Workspace Ltd
on the following matters:

3.2.1 The grounds on which the board of directors may resolve to place Infinity Workspace Ltd
in business rescue. (3)

3.2.2 The consequences that business rescue proceedings will have on the contracts that
Infinity Workspace Ltd has with its current creditors and on the legal actions that some
creditors have already instituted against Infinity Workspace Ltd. (7)
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August FI Concession Exam 2023

QUESTION 4 [25]

4.1 Coalfields Ltd, a company that recently listed its securities on the Johannesburg Stock
Exchange Limited, does not have a social and ethics committee. With reference to the relevant
legislation:

4.1.1 Indicate what the statutory functions of a social and ethics committee entail. (7)

4.1.2 Explain to the board of directors whether Coalfields Ltd is legally obliged to appoint a
social and ethics committee. (3)

4.2 With reference to the relevant legislation, define the terms “insider” and “inside information”.
(5)

4.3 Discuss the liability that may result, under the relevant legislation, if an insider who knows that
he has inside information discloses this information to another person. (10)

TOTAL: [100]

THE END

Examiners :

First : Dr V Madlela (UNISA)

Second : Prof M Lombard (UNISA)
Third : Prof TH Mongalo (University of the Witwatersrand)

©
UNISA 2023