LML4806 PORTFOLIO MEMO - MAY/JUNE 2023 - SEMESTER 1 - UNISA (DETAILED MEMO - DISTINCTION GUARANTEED!)
QUESTION 1
1.1 The Memorandum of Incorporation of Generators Unlimited (Pty) Ltd provides that only the board of directors, or any director authorised by the board, has the power to conclude ...
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LML4806
Company Law
PORTFOLIO MEMO
SEMESTER 1 - 2023
UNIQUE NUMBER: -
Due Date: - 16th MAY 2023
Includes Footnotes and/or Bibliography
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o The Memorandum of Incorporation of Generators Unlimited (Pty) Ltd
provides that only the board of directors, or any director authorised by
the board, has the power to conclude contracts on behalf of the company.
It also states that any transaction that exceeds R10 million must first be
authorised by the company’s shareholders at a general meeting by way
of an ordinary resolution. One of the directors, Nthabiseng, is authorised
by the board of directors to conclude contracts on behalf of the company.
Nthabiseng enters into a contract with Matthews for the purchase of
power distribution transformers to the value of R15 million, without first
obtaining the authorisation for the purchase by the company’s
shareholders at a general meeting. Matthews is aware of the provision in
the Memorandum of Incorporation requiring shareholder approval
because he has dealt with the company on previous occasions. However,
he does not know that the purchase in fact, has not been authorised by
an ordinary resolution of the company’s shareholders.
With reference to appropriate authority, discuss whether Generators Unlimited (Pty) Ltd
is bound by the contract concluded by Nthabiseng and Matthews. (10)
Refer to section 20(7) of the Companies Act 71 of 2008.
A third party dealing with the company in good faith may assume that that the company
has complied with all of the formal and procedural requirements in terms of the
Companies Act 71 of 2008 and the company’s Memorandum of Incorporation and rules
unless he or she knew or reasonably ought to have been aware that they had not been
complied with.
Application
There is no indication from the facts that Mathews knew or reasonably ought to have
known that Nthabiseng had failed to comply with the procedural requirement in terms
of the Memorandum of Incorporation.
There is also no indication that Judith was aware of the fact that Nthabiseng did not
comply with procedural requirement, and that she had acted in bad faith.
The contract is valid, and the company will be bound to it.
Refer to section 20(7) of the Companies Act 71 of 2008, para 7.3 of the textbook and
page 21 of the study guide.
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