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This document contains tutorial for tests and exam) questions and answers for unit 8
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Revision questions unit 8QUESTION 1
The MOI of Meaningful Meals (Pty) Ltd states that the company is authorised to issue 2000
class A ordinary shares and 200 class B non-voting preference shares. Apart from excluding
voting rights for the preference shares, the MOI has not changed any of the alterable
provisions of the Companies Act. One thousand (1000) of the ordinary shares have been
issued. Helmut holds 500 (50%) of the shares, Sellina holds 200 (20%) of the shares, and
Pranitha and Thoko hold 150 (15%) each. The board of Meaningful Meals (Pty) Ltd wants to
issue a further 100 Class A ordinary shares to Mpho, who is a well-known chef. Sellina,
Pranitha and Thoko are not happy with this idea. Discuss whether the board can proceed to
issue the shares to Mpho or whether the shareholders have any rights in this regard.
Pre-emptive rights would apply in terms of section 39
As we are dealing with a private company
That has not excluded or modified these rights in its MOI
Pre-emptive right: Current shareholders of the company will have the first right to
subscribe for any further issue of shares by the company in proportion to the voting
power currently enjoyed by them
Therefore the shares cannot be issued to Mpho unless the board has first offered
them to the existing shareholders
In proportion to their voting rights – which in this case is the same as their
percentage shareholding
o Helmut is thus entitled to subscribe for 50 shares
o Sellina must be offered 20 shares
o Pranitha and Thoko must be offered 15 shares each
Only shares that these shareholders decide not to subscribe for can be issued to
Mpho
QUESTION 2
Brightsky Properties Ltd has two classes of shares. The class A shares were issued as fully
paid shares in 2016 while the class B shares were issued in 2018 for a consideration of R30
per share of which only R20 has been received by the company. The outstanding balance of
R10 per class B share is payable in October 2023. Following excellent financial results for
the 2022 financial year, the board of Brightsky Properties Ltd has decided to declare a
dividend of R20 per share on the class A shares and to write off the outstanding
consideration of R10 per share on the class B shares. Explain how these two transactions
are regulated by the Companies Act, providing relevant definitions and setting out the
requirements that must be met.
Company will be making a distribution to shareholders
Definition of distribution in s 1 - 3 types of transactions
transfer of money or property, whether by way of...
incurring of obligation to shareholder
waiving of obligation due by shareholder
The dividend is a specific example of a transfer of money
The writing off of the outstanding consideration is an example of the third category
Requirements for both transaction are thus the same
Board must authorise the distributions
Solvency and liquidity test satisfied
assets equal or exceed liabilities
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