NAME: ZANELE NOMVULA

SURNAME: NHLAPO
STUDENT NUMBER: 66719844
COMPANY LAW- LML4806
SUBMISSION DATE: 15 MARCH 2024
ASSIGNMENT 1
Question 1

Facts
Mandla’s Role as Director and Shareholder: Mandla is both a director and
shareholder of Cargo Logistics Ltd.
Renting Warehouse and Purchase of Shares: Mandla offers to rent out a warehouse
to Cargo Logistics Ltd at a rate of R1.2 million per annum and it agrees to pay this
rent.

Relevant Case Law

Lipschitz v UDC Bank Ltd 1979 (3) SA 781
In Lipschitz, the court decided that putting the company at risk or offering security
would also count as financial help for the purposes of the Act, indicating that the
"impoverishment test" was not the exclusive yardstick for determining financial
assistance. (LML4806 Study Guide,2017)

Statutory provisions
According to the Companies Act of 1973, a corporation was forbidden from providing
financial aid to a person in order for the person to obtain shares or other securities in
the company, with some very specified exceptions. (Cassim,2021)

Conclusion
Based on the scenario provided, it appears that Cargo Logistics Ltd indirectly provided
financial assistance for the purchase of its securities by Mandla through the rental
agreement.

Question 2
1.
1.1 Mrs Meerkat
Mrs Meerkat the former director of Qhuba (Pty) Ltd. As a director she signed, agreed
to or provided authority for the publication of false or misleading financial statements
(redirecting company funds meant to pay Qhuba (Pty) Ltd’s suppliers to her personal
account). Which led her to be disqualified from being a director of a company.
Section 77(3) (b) of the Act, as read with section 22 of the Act, penalises and holds
directors personally liable to the company for any loss incurred through knowingly
carrying on the business of the company recklessly, with gross negligence, with intent
to defraud any person or for any fraudulent purpose. (Cassim,2021)
Therefore, a company cannot wilfully allow someone who is ineligible or disqualified
to hold or serve as a director.
1.2 Mr Squirrel
Mr Squirrel was declared insolvent by the High Court in 2003. Section 69(8)(b)(i)
provides that an unrehabilitated insolvent is disqualified from being a director of the
company. Such a person is (Mr squirrel), therefore, also prohibited from being a
member of a board committee in terms of section 72(2)(a)(i). (Cassim,2021)
2.
2.1 Mrs Fox
The Act requires at least three non-executive directors who meet the specified minimal
qualification requirements should be on the audit committee. (Cassim,2021)

Mrs fox then qualifies to be appointed as the audit committee, because; she's non-
executive director and she has not been engaged in the maintenance of any
company's financial record for the more than one year.
2.2 Miss Wolf
The standards of conduct for directors outlined in section 76 of the Act also apply to
members of the audit committee, according to section 76(1) of the Act. However, each
audit committee member must also serve as a director and is always accountable for
fulfilling the obligations outlined in Section 76 of the Act. (Cassim,2021)

Miss Wolf being the managing director of ATF Ltd, qualifies her to be elected as a
member of the Company’s audit committee; according to the Act.
2.3 Mr Coyote
Mr Coyote has over 10 years’ experience as a partner of one of the big accounting
and auditing firms. According to Company Act 71 of 2008; requires the audit committee
to be elected at the annual general meeting. Audit committee members must have
academic degrees or expertise in finance, accounting, commerce, economics, law,
corporate governance, industry, public affairs, or human resources. (LML4806 Study
Guide,2017)
Therefore, with his experience in accounting, Mr Coyote can be elected as a member
of the company’s audit committee.
3. Mr Civet
Section 94(9) af the Companies Act entitles a company to appoint an auditor at its
annual general meeting. other than one nominated by the audit committee, but if such
an auditor is appointed, the appointment is valid only if the audit committee is satisfied
that the proposed auditor is independent of the company. (Cassim,2021)
For that reason, Mr Civet can be re-appointed as a member of the company’s audit
committee.
4. According to Section 48(3), a company may not repurchase its own shares, and a
subsidiary of a company may not purchase shares of that company if, as a result of
that acquisition, there would no longer be any shares of the or company in issue other
than by shares held by one or more subsidiaries of the company; or convertible or
redeemable shares. This prohibition applies regardless of any provisions of laws,
agreements, orders, or the company's memorandum of incorporation. (Cassim,2021)
Therefore, ATF Ltd is not authorised to acquire its own shares.

Conclusion
The proposed election of Mrs Meerkat and Mr Squirrel as directors raises serious
statutory concerns due to Mrs Meerkat's previous misconduct as a director of Qhuba
(Pty) Ltd. Her redirection of company funds to her personal account and subsequent
removal from office and Mr Squirrel being unrehabilitated insolvent; for this reason
may contravene statutory provisions related to director eligibility and integrity.
Therefore, the claim that this ordinary resolution raises serious statutory concerns has
merit.
Mr Skunk should consider the potential legal implications of electing Mrs Meerkat as
a director.
Bibliography
Books
Cassim FHI, Cassim MF, Cassim R, Jooste R, Shev J and Yeats J The Law of
Business Structures Second Edition (2021) Juta & Company (Pty) Ltd Cape Town
Company Law Study Guide (University of South Africa,2017)
Case law
Lipschitz v UDC Bank Ltd 1979 (3) SA 781
Legislation
The Companies Act 1973
The Companies Act 71 of 2008

ACADEMIC HONESTY DECLARATION

1. I understand what academic dishonesty entails and am aware of Unisa’s policies in
this regard.
2. I declare that this assignment is my own, original work. Where I have used someone
else’s work, I have indicated this by using the prescribed style of referencing. Every
contribution to, and quotation in, this assignment from the work or works of other
people has been referenced according to this style.
3. I have not allowed, and will not allow, anyone to copy my work with the intention of
passing it off as his or her own work.
4. I did not make use of another student’s work and submitted it as my own.
NAME: ZANELE NHLAPO
SIGNATURE:
STUDENT NUMBER: 66719844
MODULE CODE: LML4806
DATE: 17 MARCH 2024