Exam (elaborations)
Exam (elaborations) LML4806 - Company Law (LML4806)
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Exam (elaborations) LML4806 - Company Law (LML4806)
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Question 1
Musa, Amos, Sipho and Jimmy are directors of Khubo Limited. Jimmy was
appointed as an executive director of Khubo Limited three years ago under a
five-year contract of employment with the company. Musa has expressed his
concerns to the board of directors that for the past two financial years Jimmy
has been failing to ensure the timely preparation and submission of the
company’s annual financial statements, and that Jimmy omitted to sign the
annual financial statements for the previous financial year as the authorised
director, as required. Musa has also informed the board of directors that, after
joining Khubo Limited, Jimmy was removed as chairperson of the board of
trustees of the JF Pension Fund after he forged some documents and
withdrew R2 million from the JF Pension Fund’s bank account for his personal
use. Advise Jimmy on the following:
1.1 Whether under the circumstances of this case the board of directors of
Khubo Limited will have valid grounds to remove him (Jimmy) as a director of
the company.
Section 69 of the Companies Act provides that a director may be removed if he or
she breaches any provision of the Companies Act or any other law relating to the
company's activities.1 In this case, Musa has informed the board of directors that
Jimmy failed to ensure the timely preparation and submission of the company’s
annual financial statements and omitted to sign the annual financial statements for
the previous financial year as the authorised director, as required. This conduct may
amount to a breach of the Companies Act, which requires directors to ensure that
the company's financial statements are prepared in accordance with applicable
accounting standards and submitted to the Companies and Intellectual Property
Commission (CIPC) within the prescribed timeframes.
1
See section 69 of the Companies Act 71 of 2008.
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