LML4806 PORTFOLIO MEMO - SEMESTER 2 - 2024 - OCTOBER/NOVEMBER - UNISA - DUE DATE :- 24 OCTOBER 2024 (FULLY REFERENCED! DISTINCTION GUARANTEED!)

LML4806 PORTFOLIO MEMO - SEMESTER 2 - 2024 - OCTOBER/NOVEMBER - UNISA - DUE DATE :- 24 OCTOBER 2024 (FULLY REFERENCED! DISTINCTION GUARANTEED!) QUESTION 1 [20] 1.1 You are approached by Stefan, the chairperson of the board of directors of JP Textiles Ltd for legal advice. He informs you that JP Textiles Ltd will be holding its fifth annual general meeting (AGM) next month at its registered office in Johannesburg. He further informs you that the board of directors is concerned that a significant number of the company’s shareholders and shareholder proxies who are based outside Johannesburg and overseas will not be able to travel to Johannesburg to attend the AGM in-person (physically) at the company’s registered office. Advise Stefan on what the company could do to ensure that it provides a reasonable opportunity for all the shareholders and shareholder proxies to attend and participate at its fifth AGM. (5) 1.2 SA Renewables Ltd holds 40% of the ordinary shares in Green Energy Ltd and 100% of the ordinary shares in New Technologies Ltd. New Technologies Ltd holds 25% of the ordinary shares in Green Energy Ltd. Green Energy Ltd wants to issue shares to raise cash. An investment company called Investment Solutions (Pty) Ltd wants to purchase the shares to be issued by Green Energy Ltd. However, Investment Solutions (Pty) Ltd does not have the money for the shares and requires a loan to purchase the shares. Therefore, the directors of SA Renewables Ltd, Green Energy Ltd and Investment Solutions (Pty) Ltd are negotiating a transaction in terms of which: • Investment Solutions (Pty) Ltd will purchase 10% of the shares to be issued by Green Energy Ltd; • The consideration for the shares will be paid for by a loan of R250 million that will be obtained by Investment Solutions (Pty) Ltd from Capital Bank Ltd; • SA Renewables Ltd will assure Capital Bank Ltd that Investment Solutions (Pty) Ltd will repay the loan; and • SA Renewables Ltd will give an undertaking to Capital Bank Ltd that, should Investment Solutions (Pty) Ltd fail to repay the loan, SA Renewables Ltd will step into Investment Solutions (Pty) Ltd’s shoes and repay the loan to Capital Bank Ltd directly. 1.2.1 Explain whether SA Renewables Ltd and Green Energy Ltd are related companies. (5) 1.2.2 Discuss the formalities and procedures that must be complied with before the board of directors may authorise the conclusion of an agreement in terms of which SA Renewables Ltd will assume the obligation to repay the loan in question to Capital Bank Ltd in the event that Investment Solutions (Pty) Ltd fails to do so. Also explain what the CONFIDENTIAL Page 8 of 10 LML4806 October/November 2024 implications would be if SA Renewables Ltd concludes the agreement contrary to the required formalities and procedures. (10) QUESTION 2 [20] 2.1 Discuss whether the statutory duty of a director to act with care, skill and diligence as set out in the Companies Act 71 of 2008 is a fiduciary duty. Also explain the test(s) that must be applied to determine a breach of this duty. (5) 2.2 Mashudu and Peter are the only directors of Star Engineering (Pty) Ltd. Peter was appointed as an executive director of Star Engineering (Pty) Ltd two years ago under a five-year contract of employment with the company. Mashudu is concerned that for the past two financial years Peter has been failing to ensure the timely preparation and submission of the company’s annual financial statements, and that Peter omitted to sign the annual financial statements for the previous financial year as the authorised director, as required. Mashudu approaches you for legal advice regarding the removal of a company director. Advise Mashudu on the following matters: 2.2.1 Whether there is any valid basis to remove Peter as a director of Star Engineering (Pty) Ltd. (3) 2.2.2 The procedure that must be followed and the rights that Peter has in terms of the Companies Act 71 of 2008 should Mashudu decide that he (Peter) must be removed as a director of Star Engineering (Pty) Ltd. (12) QUESTION 3 [20] 3.1 Kyles Ltd, an unlisted company, wants to offer new shares to any members of the investing public to raise capital. The company has previously issued its shares to the public, but it has since appointed a new board of directors. The new board of directors is not sure whether a prospectus would be required in respect of the shares that the company intends to offer to the public this time around. The new board of directors is also worried that some of the information that the company might be required to furnish in a prospectus will be detrimental to the company’s business. Therefore, the board of directors approaches you for legal advice regarding the share offers and a prospectus. Advise the board of directors on the following matters: CONFIDENTIAL Page 9 of 10 LML4806 October/November 2024 3.1.1 The nature of the offer by Kyles Ltd in the scenario above and whether a prospectus will be required in respect of the shares that Kyles Ltd intends to offer. (7) 3.1.2 Whether, if a prospectus is required, there are circumstances when a company may be allowed to omit information from a prospectus and what a company should do if it wishes to omit information from the prospectus. (8) 3.2 Springbok Finance (Pty) Ltd is one of the creditors of Falcon Airlines Ltd. The board of directors of Falcon Airlines Ltd passed a resolution placing Falcon Airlines Ltd in voluntary business rescue and appointed Ntando as the business rescue practitioner. Springbok Finance (Pty) Ltd believes that Falcon Airlines Ltd can be successfully rescued. However, Springbok Finance (Pty) Ltd is dissatisfied with the way Ntando is performing his duties as the business rescue practitioner as he has failed to implement the approved business rescue plan. Ntando has also not been preparing and submitting the required monthly reports even though the business rescue proceedings have lasted longer than three months. Springbok Finance (Pty) Ltd wants to appoint Andile, an experienced business rescue practitioner in the airline industry, to replace Ntando as the business rescue practitioner of Falcon Airlines Ltd. Explain whether there are grounds to remove Ntando as the business rescue practitioner, and if so whether Springbok Finance (Pty) Ltd may appoint Andile to replace Ntando as the business rescue practitioner of Falcon Airlines Ltd. (5) QUESTION 4 [20] 4.1 The board of directors of Karoo Ltd, a newly incorporated company, wants to appoint members of the following committees: • Audit committee • Social and ethics committee • Risk management committee With reference to the relevant provisions of the applicable legislation, discuss whether the board of directors may appoint a person who is not a director of Karoo Ltd as a member of the above committees. (You should deal with each committee separately in your answer). (10) CONFIDENTIAL Page 10 of 10 LML4806 October/November 2024 4.2 Gillian and Eric are close friends. Gillian is a non-executive director of Waverly Ltd, a listed company. Eric is the sole director of Ericsson Capital (Pty) Ltd, a company that holds 250 000 shares in Waverly Ltd. Gillian tells Eric that Waverly Ltd and its executive directors are being investigated by regulatory authorities for accounting and tax fraud relating to the company’s annual financial statements for the past two financial years. Eric immediately instructs his stockbroker to sell all the shares held by Ericsson Capital (Pty) Ltd in Waverly Ltd. The stockbroker sells the shares at a price of R100 per share. Eric also advises his brother, Raymond, to sell at least half of the shares that he holds in Waverly Ltd but does not tell him the reason why he should do so. Raymond does not sell his shares. The following week, the board of directors of Waverly Ltd issues an announcement that the company’s annual financial statements for the past two financial years will be restated and that the company’s accounting and tax affairs are being investigated by regulatory authorities. The share price of Waverly Ltd falls by 60% to R40 per share. Explain whether Gillian, Eric and the stockbroker have committed any criminal offence(s) in terms of the Financial Markets Act 19 of 2012. (You should deal with each person separately and you should not include a discussion of any defences to the relevant offences in your answer). (10) TOTAL: [80]