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JAN/FEB 2024QUESTION 1 [25]
1.1 Independent Game Services (Pty) Ltd (the company) specialises in
providing game management and veld rehabilitation services. The
company’s registered office is situated in Mbombela in the Mpumalanga
province. John, Sarah, Vusi and Aubrey are the directors of the company.
To ensure that the company does not deviate from its core business of
providing game management and veld rehabilitation services, the following
clauses were inserted into the company’s Memorandum of Incorporation:
“Capacity
• The company may not participate in any trade or transactions other than
for purposes of the provision of game management and veld rehabilitation
services.
• The company may not enter any transaction for the purchase or sale of
immovable property outside the borders of the Mpumalanga province.”
While on holiday in Bloemfontein, in the Free State province, Sarah spotted
a holiday flat for sale and thought it would be a great investment for the
company. Without the knowledge of the shareholders and directors, Sarah
immediately arranged an appointment with the owner of the holiday flat,
Tayob, and concluded an agreement for the purchase of the holiday flat at
a price of R1 000 000 on behalf of the company. The shareholders and the
other directors object to the transaction.
1.1.1 Advise the board of directors whether Independent Game
Services (Pty) Ltd can escape liability for performance in terms of the
contract concluded by Sarah and Tayob on the ground that the
transaction falls beyond the capacity of the company. (6)
This section deals with legal capacity and ultra vires
Section 20(2) and section 77(3) of the companies act is relevant to this
section
Define capacity
They cannot ecape liability
Moi specific in terms of area which immovable property can be purchased
Saras act is ultra vires and such is not
, Binding term of of the old act
1.1.2 Explain whether Independent Game Services (Pty) Ltd and its
shareholders would be able to hold Sarah personally liable, on any
basis, for the conclusion of the contract. (5)
Section 20(6) provides that a shareholder of the company 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 Act or a
limitation, restriction or qualification contemplated in section 20. When
director act beyond the scope of the company’s capacity they are in breach
od their
fiduciary duties. A director who is in breach of his fiduciary duties may be
held personally liable for any damages or costs suffered by the company.
The liability of the directors in this case is provided for in section 77(3)(a) of
the Act. Yes, the directors can be held personally liable by the shareholders
in terms of section 20(6) and by the company in terms of section 77(3).
1.2 The board of directors of Techno Industries Ltd wants to convene
the annual general meeting of the company’s shareholders. With reference
to the relevant provisions of the Companies Act 71 of 2008, advise the
board of directors on the matters that must, at a minimum, be dealt with at
the annual general meeting.(7)
Section 61(8)of the companies act
In terms of the Companies Act, only public companies have a statutory obligation
to convene annual general meetings. However, other companies may voluntarily
hold such meetings. Section 61 stipulates that at least the following matters must
be transacted at the annual general meeting that
is election of directors to the extent required by the Companies Act or the
company’s Memorandum of Incorporation,
appointment of an auditor for the following financial year, appointment of an
audit committee, presentation of the directors report, presentation of audited
financial statements for the immediately preceding financial year, presentation of
an audit committee report and
,any matter raised by shareholders. Txb 11.6.2
1.3 Mashudu, a shareholder of Techno Industries Ltd, has received
written notification from the company that the annual general meeting of
the company would be held in ten days’ time. The notice does not inform
the shareholders of the purpose of the meeting. With reference to the
relevant provisions of the Companies Act 71 of 2008, discuss whether the
notice of the shareholders’ meeting given in the above scenario is valid. (7)
Section 62 of the companies act also check 11.8.1-4(PUBLIC 15 DAYS
,PRIVATE 10 DAYS
The issue in this question relates to the validity of a notice of meeting. The question requires
you to state and refer to the relevant provisions of the Companies Act 71 of 2008. The relevant
provisions, in this regard, are contained in section 62 of the Companies Act 71 of 2008. You
should have pointed out that Scarrow Iron Limited is a public company. In terms of section
62(1)(a) of the Companies Act 71 of 2008, the notice of a shareholders meeting must be
delivered at least fifteen (15) business days before the meeting is to begin. However, in terms of
section 62(2), a company’s Memorandum of Incorporation may provide for a longer or shorter
minimum notice period. Section 62(3)(b) requires that the notice must include the general
purpose of the meeting. Application to the facts: Since Scarrow Iron Limited is a public
company, the notice should have been delivered at least fifteen (15) business days before the
meeting was to commence. In this case, Mashudu was given only ten (10) days’ notice of the
meeting instead of fifteen (15) business days. Therefore, the notice given is invalid unless the
Memorandum of Incorporation makes provision for a shorter notice period. Furthermore, the
purpose of the meeting was not stated in the notice, which is contrary to the requirements of
section 62(3)(b) of the Companies Act 71 of 2008. Therefore, the notice provided is invalid.
QUESTION 2 [25]
2.1 Nathi is one of the four directors of Landman Construction (Pty) Ltd.
His co-directors are of the opinion that Nathi is neglecting his duties as a
director because he is out playing golf all the time. The board of directors
therefore wants to remove him as a director. Nathi is unhappy about the
board’s intentions to remove him as a director, as he believes that he is in
fact promoting the company by playing golf regularly with potential clients.
, With reference to the relevant provisions of the Companies Act 71 of 2008
and the facts provided, answer the following questions:
2.1.1 Advise Nathi on whether the board of directors would have any valid
grounds for removing him as a director, the procedure that must be
followed before the board may remove a director, and what his rights
would be in the event that the board of directors determines that he should
be removed as a director of Landman Construction (Pty) Ltd. (10)
The key issue in this question relates to the grounds for the removal of a director
by the board of directors. The key issues in this question relate to the procedure
for the removal of a director by the board of directors, and the options available
to the removed director
SECTION 71 WILL BE relevant
The relevant statutory provisions/principles
The provisions of section 71(3) of the Companies Act are relevant. You should
have set out the provisions of section 71(3) that are relevant to this question,
namely that where a company has more than two directors, the board of
directors may remove a director on the grounds that:
• the director has become ineligible or disqualified in terms of section 69, other
than on the grounds contemplated in section 69(8)(a), or
• incapacitated to the extent that the director is unable to perform the functions
of a director, and is unlikely to regain that capacity within a reasonable time, or
• has neglected or has been derelict in the performance of the functions of
director
Application of the grounds for removal to the facts: Nathi may be removed
on the ground that he is has neglected or has been derelict in the performance of
the functions of director
The relevant statutory provisions/principles regarding the procedure for
removal of directors by the board, and application to the facts:
According to section 71(4)
• The board of directors, other than Nathi must determine the matter of NATHI’s
removal (on the allegations of neglect) by board resolution.
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