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Summary Auditing third year
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This download consists of all the topics that will be discussed in third year. The summaries are made according to the university of pretoria's standards.
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COMPANIES ACTShares & Securities in a Profit Company
s35: Legal nature of shares:
Movable property
No nominal/par value
Co. can’t issue shares to itself
No rights until issued
Co. subsequently acquires its own shares/surrendere to co. = “authorized not issued” status
s36: Authorisation:
MOI set out
o classes + no. authorized to issue
o designation for class
o preferences, rights + limitations (also w/o then board classify later BUT can’t
issue until then)
MOI can authorize unclassified shares (classified by board later)
Changed only by
o Amendment of MOI by special resolution (require notice of amendment)
o BOD (increase/decrease no.; reclassify; classify; determine pref, rights, limitations)
s37: Prefs, rights, limitations
Each issued share = 1 general voting right
Every share has irrevocable right of s/h to vote on any proposal to amend P,R,L + other
terms associated with that share (seek relief ito s164 if notified co. + present at meeting +
voted against)
If co. has only 1 class of shares – vote on every matter + holders receive net assets on
liquidation
MOI can establish special/conditional voting rights, preferences, distributions, redemptions
etc.
s38: Issuing shares
BOD can issue shares within authorized SC or s36
If issue shares not authorized or >authorized shares, retroactively authorized in 60 bus
days
o If not, issue is nullity + co. return to person FV of consid. received
o Director liable ito s77 (present + failed to vote against)
1
,s39: Subscription of shares
Prvt + personal liab. co. only
Prvt co. wants to issue shares, existing s/hs have right before other persons to be offered
+ subscribe for % of shares = to own holding (can subscribe for fewer; shares not
subscribed for offered to other persons)
s40: Consideration for shares
Issued only for:
o adequate consid. (det. by BOD before issue – can’t be challenged)
o ito conversion rights
o as caps share (s47)
If future services/pmt – considered received only when physical pmt/oblig. fulfilled :.shares
issued held in trust + tsfred later
o no voting rights
o pre-emptive rights exercised to extent pmt received
o distribution paid to extent pmt received OR credited to amt owing
o can’t be transferred w/o consent; tsfred to party to extent paid;
o if dishonoured/no pmt/fulfilment of oblig. (40 bus. days) – return to co. + cancelled by
DEMAND
s41: S/h approval to issue shares in CERTAIN CASES
Issue approved by special resolution if issued to:
o director, future director, PO, future PO of co.
o person related/inter-related to co./director/PO
o nominee of above
Above is NA if issue is:
o under agreement underwriting shares
o in exercising pre-emptive rights (s39)
o in prop. to existing holding + same terms & conditions offered to all s/hs
o ‘ee share scheme
o offer to public
If voting power of class of shares issued >=30% of ALL shares of that class – special
resolution
Director liable ito s77 (present + failed to vote against)
s42: Options
BOD det. consid. for which options + related shares issued
= decision to issue auth. shares
Director liable ito s77 if shares for which options issued not authorized
s43: Securities other than shares
BOD can issue secured/unsecured debt instruments + det. if secured/unsecured (doc must
indicate)
2
, Can grant special privileges – attending + voting @ general meetings; appointment
directors; allotment, redemption, substitution of instrument for shares
Trustee – not director, PO or related; no conflicting interest in co.; knowledge +
experience; 75% instrument holders approval
s44: Financial assistance for subscription of securities
BOD can auth. co. to provide fin assist. (loan etc.) to any person to subscribe
for/purch. securities/options issued by co.
Can’t auth. UNLESS pursuant to:
o ‘ee share scheme; or
o special resolution adopted within prev 2 yrs approving
assistance AND
o BOD satisfied that after fin assist, S&L test satisfied + terms fair & reasonable to co.
If void, director liable ito s77
s45: Loans/Other fin assistance to Directors
BOD can auth. co. to provide direct/indirect fin assistance to director/PO/person related
Provide written notice to s/hs + TUs of ‘ees :
o Value > 1/10 of 1% of co.’s net worth: within 10 bus days after resolution
o Any other: within 30 bus days after end of fin yr
Can’t auth. UNLESS – same s44
If void, director liable ito s77
s46: Distributions must be auth. by BOD
Co. can only make distribution if:
o existing legal obligation/court order
o BOD has authorized
o S&L satisfied after
o BOD acknowledged application of S&L + concluded
If not completed in 120 bus days: reconsider S&L + adopt further resolution
s77 Director liable
s47: Caps Shares
BOD (by resolution) approve issue of caps shares + can also permit s/h entitled to caps
to elect to receive cash
Can’t offer cash UNLESS
o S&L ito s46
3
, o BOD satisfied that comply
s48: Co./Subsid. acquiring Co. Shares
BOD can det. co. will acquire no. of own shares
BOD of subsid. det. if can acquire shares in holding co BUT
o not > 10% of issued shares in class can be held by all subsid. of co. together AND
o no voting rights exercised
No acquire if after acquisition, no shares in issue other than shares held by
subsid. or convertible/redeemable shares
Agreement by co. to re-acquire shares issued by it = enforceable (if unable due to above,
apply to court for order + prove breach then court make just order + ensure person paid
at earliest date)
s77 Director Liable
Special Resolution if co. to acquire its own shares from a director/PO/related person
Securities Registration & Transfer
s49: Securities evidenced by certificates or uncertificated
Securities either evidenced by certificates or uncertificated
Rights + obligations not different due to above
Can transfer from one to the other
s50: Securities Register & Numbering
Co. must have + maintain certificated + uncertificated securities registers
After issuing, enter in register: no. issued, names + addresses of s/hs, no. of
securities in trust/restricted transfer
Unless all shares rank equally – class of shares distinguished by numbering system
s51: Registration & transfer of certificated securities
Certificate
o State on face: co. name; person to whom issued; no. + class; transfer restriction;
o Signed by 2 auth persons
o = Proof of ownership
Transfers entered in securities register (for certificated)
s52: Registration of uncertificated securities
Person can request to see uncertificated securities register
Co. can request (+ with pmt of prescribed fee) person to furnish details of uncertificated
securities
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