LML4806 Semester 1 Assignment 1 - 2024
Company Law
LML4806
Semester 1 Assignment 1 - 2024
Mercantile Law Department
CONTENTS
Page
1 GENERAL INSTRUCTIONS .......................................................................................................... 3
2 ASSIGNMENT 1 ............................................................................................................................. 3
Question: 1 ................................................................................................................................................. 3
Question: 2 ................................................................................................................................................. 4
2
1 GENERAL INSTRUCTIONS
• Assignments test your understanding of the learning material and your ability to apply what
you have learnt. Two written assignments are set for this module i.e., Assignment 1
and Assignment 2. Answering these questions gives you practice in answering the type
of questions that you may expect in the examination.
• The marks you obtain for Assignment 1 and Assignment 2 make up your year mark.
• You should answer all questions under each assignment. Your answer to each assignment
should generally not exceed two and a half pages if it is typed (excluding the bibliography).
• You should reference your sources in your answers. You may reference the sources as
you wish (e.g., in-text or in the footnotes) but it is preferable that you reference your sources
within the text of your answers. It is not mandatory to include a bibliography if you have
clearly referenced your sources within the text of your answers or in the footnotes. You
may include a bibliography at the end of your assignment voluntarily. However, you should
remember to include your Honesty Declaration Form.
• Refer to Paragraph 9 of your Tutorial Letter 101 for the general information about
assessment.
• Also refer to Paragraph 10 of your Tutorial Letter 101 for important information regarding
academic dishonesty (plagiarism and cheating).
• You should study and refer to the prescribed study material when answering your
assignments. You should not use Artificial Intelligence Software (e.g., ChatGPT) to give
you answers to the assignment questions as this will prevent you from achieving the
learning objectives as well as attaining all the skills and values needed in legal practice.
Artificial Intelligence Software can give you inaccurate answers that are not aligned to the
prescribed study material. The University can easily identify the answers obtained from
Artificial Intelligence Software and the markers will award a zero mark for such answers.
Furthermore, students who engage in academic dishonesty may be referred to a
disciplinary hearing.
2 ASSIGNMENT 1
Question: 1
Mandla is both a director and shareholder of Cargo Logistics Ltd. He wants to buy more shares
in Cargo Logistics Ltd but does not have enough money to do so. He offers to rent out a
warehouse to Cargo Logistics Ltd. Cargo Logistics Ltd agrees to pay R1.2 million per annum as
rent for the warehouse. Mandla then uses part of the money to purchase 10 000 shares in Cargo
Logistics Ltd.
With reference to the relevant case law, statutory provisions and the facts provided in the above
scenario, discuss whether Cargo Logistics Ltd has provided financial assistance for the purchase
of its securities. (6)
3
Question: 2
You are an attorney at one of the leading corporate and commercial law firms in South Africa.
You are approached by Mr Skunk, the chairperson of the board of directors of ATF Ltd, for legal
advice. He informs you that certain shareholders of ATF Ltd and their proxies have expressed
their concerns that all the ordinary resolutions proposed to be tabled for shareholder vote at the
company’s upcoming annual general meeting raise serious statutory concerns. Study the
following ordinary resolutions that have been extracted from the relevant notice of annual general
meeting, including the notes regarding some of the resolutions in italics, and answer the question
below.
ORDINARY RESOLUTIONS FOR CONSIDERATION AND ADOPTION
For ordinary resolutions number 1.1 to 4 to be approved by shareholders they must be supported by more
than 50% of the voting rights exercised on the resolution.
1. Election of directors by ordinary resolutions
Resolved that the following individuals be and are hereby elected as directors, as required by
the Memorandum of Incorporation:
1.1 Mrs Meerkat
1.2 Mr Squirrel
Notes:
• Mrs Meerkat previously served as a director of Qhuba (Pty) Ltd. A disciplinary process
conducted by the board of directors of Qhuba (Pty) Ltd concluded that Mrs Meerkat had been
redirecting company funds meant to pay Qhuba (Pty) Ltd’s suppliers to her personal account.
The board of directors of Qhuba (Pty) Ltd therefore removed Mrs Meerkat from her office as a
director on 15 January 2020.
• Mr Squirrel was declared insolvent by the High Court in 2003.
2. Election of the audit committee by ordinary resolutions
Resolved that the following individuals be and are hereby elected as members of the audit
committee:
2.1 Mrs Fox
2.2 Miss Wolf
2.3 Mr Coyote
Notes:
• Mrs Fox is a non-executive director of ATF Ltd. She served as the financial director of ATF
Ltd’s wholly-owned subsidiary called Britz (Pty) Ltd until she resigned from that position on 31
July 2022.
• Miss Wolf is the managing director of ATF Ltd.
• Mr Coyote is not a director of ATF Ltd. The board believes that the election of Mr Coyote to the
audit committee will benefit the company as he has over 10 years’ experience as a partner of
one of the big accounting and auditing firms.
3. Re-appointment of auditor by ordinary resolution
Karoo Inc. is hereby re-appointed as the independent registered auditors until the next Annual
General Meeting (noting that Mr Civet is the individual registered auditor who will undertake
the audit in respect of the ensuing financial year) as recommended by the audit committee.
4
Notes:
• Mr Civet has undertaken the audit of ATF Ltd as the individual registered auditor of Karoo Inc.
continuously since December 2018.
4. Repurchase of shares by the company and/or subsidiary
Resolved that ATF Ltd and/or any subsidiary of ATF Ltd be and are hereby authorised to
acquire up to 3% of the issued ordinary shares of ATF Ltd that are held by its directors and
prescribed officers.
With reference to the relevant statutory provisions, the facts and the information provided in the
extract from the notice of the annual general meeting above, advise Mr Skunk on whether the
claim that all the proposed ordinary resolutions raise serious statutory concerns has any merit.
(You should deal with each ordinary resolution separately in your answer). (14)
TOTAL FOR ASSIGNMENT 1: [20]
__________The End__________
