Question: 1 Mandla is both a director and shareholder of Cargo Logistics Ltd. He wants to buy more shares in Cargo Logistics Ltd but does not have enough money to do so. He offers to rent out a warehouse to Cargo Logistics Ltd. Cargo Logistics Ltd agrees to pay R1.2 million per annum as rent for th...
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[COMPANY LAW ] LML4806
SEMESTER 1 2024
Mercantile Law Department
ASSIGNMENT 01
DUE : MARCH 2024
, COMPLEETE ANSWERS
100 % TRUSTED WORKINGS
EXPLANATIONS AND SOLUTIONS
ALL QUESTIONS ANSWERED FOR YOU
Question: 1
Mandla is both a director and shareholder of Cargo Logistics Ltd. He
wants to buy more shares in Cargo Logistics Ltd but does not have
enough money to do so. He offers to rent out a warehouse to Cargo
Logistics Ltd. Cargo Logistics Ltd agrees to pay R1.2 million per
annum as rent for the warehouse. Mandla then uses part of the money
to purchase 10 000 shares in Cargo Logistics Ltd. With reference to
the relevant case law, statutory provisions and the facts provided in
the above scenario, discuss whether Cargo Logistics Ltd has
provided financial assistance for the purchase of its securities.
Answers
In the scenario provided, it appears that Cargo Logistics Ltd has provided
financial assistance for the purchase of its securities by agreeing to rent a
warehouse from Mandla at a rate of R1.2 million per annum, which Mandla
then used to purchase 10,000 shares in the company.
In many jurisdictions, including South Africa, the provision of financial
assistance for the purchase of a company's securities is regulated under
company law. Section 44 of the South African Companies Act, for example,
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