Exam (elaborations)

LML4806 Combined TL .

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Course
LML4806 - Company Law

Institution
University Of South Africa

LML4806 Combined TL 2013- 2021. LML4806/201/2/2013 Tutorial letter 201/2/2013 Company Law LML4806 Semester 2 Department of Mercantile Law IMPORTANT INFORMATION: This tutorial letter contains important information about your module. This study source was downloaded by from CourseH on :53...

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lml4806 combined tl 2013 2021

Institution
University of South Africa
Course
LML4806 - Company Law

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LML4806 Combined TL 2013-
2021.

, LML4806/201/2/2013

Tutorial letter 201/2/2013

Company Law

LML4806

Semester 2

Department of Mercantile Law

IMPORTANT INFORMATION:

This tutorial letter contains important information
about your module.

This study source was downloaded by 100000784824484 from CourseHero.com on 06-11-2022 06:53:14 GMT -05:00

https://www.coursehero.com/file/31346452/LML4806-201-2-2013-Commentary-Oct-Nov-2012-Exampdf/

, Dear Student,

By now you should have received the following tutorial letters:

1 Tutorial Letter 101/2013
2 Tutorial Letter 102/2013
3 Tutorial Letter 103/2013

CONTENTS

1 COMMENTARY ON ASSIGNMENT 01
2 COMMENTARY ON ASSIGNMENT 02
3 COMMENTARY ON OCTOBER/NOVEMBER 2012 EXAMINATION PAPER
(posted on myUnisa)

1 COMMENTARY ON ASSIGNMENT 01
See sections 1 and 113(2) of the Companies Act of 2008

This transaction would constitute an amalgamation or merger in terms of section 1 of the
Companies Act of 2008 if it involves the amalgamation or merger of two profit companies and
would result in the formation of a new company, TSF Ltd, holding all the assets and liabilities of
Two Square Ltd and Four Block Ltd. Upon completion of the amalgamation or merger, Two
Square Ltd and Four Block Ltd would cease to exist. The amalgamation or merger of Two
Square Ltd and Four Block Ltd is permissible provided that the board of directors of each
company reasonably believe that upon completion of the amalgamation or merger, TSF Ltd will
satisfy the solvency and liquidity test.
The two companies must enter into a written agreement setting out the terms and means of
effecting the amalgamation or merger, and in particular would have to set out the particulars
required in terms of section 113(2) in the agreement.
The directors of Two Square Ltd and Four Block Ltd would then have to submit the proposed
amalgamation or merger agreement to the shareholders of Two Square Ltd and Four Block Ltd
respectively for approval by special resolution. The notice of the shareholders’ meeting would
have to be accompanied by a copy or summary of the amalgamation or merger agreement and
of the provisions of sections 115 and 164 (the last-mentioned section regulates the appraisal
rights of dissenting shareholders).

See Companies and other Business Structures in South Africa par 10.2.2 and 10.3.2 and
study unit 8 of your study guide.

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https://www.coursehero.com/file/31346452/LML4806-201-2-2013-Commentary-Oct-Nov-2012-Exampdf/

, LML4806/201

2 COMMENTARY ON ASSIGNMENT 02

See sections 38 and 41(2) of the Companies Act of 2008

The question deals with the directors’ right to take the decision to issue new shares, and also
the shareholders’ right of pre-emption. The prohibition on a private company offering its shares
to the public is also an issue.

Directors’ right to take the decision to issue new shares:
The Companies Act regards the decision to issue shares as a management decision. The board
of directors has the authority to take the decision to issue shares without approval of the
shareholders. Since the shares are already authorised there is no limit on the power of the
board to issue these shares. Your answer should have included a discussion of this power
conferred on the board of directors.
Therefore, since the issue of shares is a management decision, Johann as a shareholder
cannot claim prejudice as this is a management decision requiring no special resolution. The
facts of the case do not contain any indication that the shares are issued to any of the parties in
terms of which the Act requires shareholder approval. It can therefore be assumed that the
decision to issue new shares is solely one for the board to take.
The MOI of a private company must contain a prohibition against the offer of its shares to the
public but since the shares have only been offered to Bheki, it is doubtful whether this can be
regarded as an offer to the public.

Pre-emptive rights

Your answer should also have included a discussion on the rights of pre-emption of
shareholders of private companies to new shares issued by the company.

This means that when the company issues new shares, these shares must be offered to
existing shareholders first pro rata to their current shareholdings. The question clearly states
that the MOI has not altered any provisions of the Act in this regard, so the pre-emptive rights of
existing shareholders have not been excluded. There is also no indication of any of the
conditions under which the pre-emptive rights would not apply. The existing shareholders must
thus be offered the opportunity to subscribe for these shares before they are offered to Bheki.

See Companies and other Business Structures in South Africa par 4.5 and 5.6 and study
unit 5 of your study guide.

This study source was downloaded by 100000784824484 from CourseHero.com on 06-11-2022 06:53:14 GMT -05:00 3

https://www.coursehero.com/file/31346452/LML4806-201-2-2013-Commentary-Oct-Nov-2012-Exampdf/

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