LML4806 Assignment 2 Semester 2 - 2023
Question: 1
With reference to appropriate authority, discuss the appointment and
composition of the social and ethics committee. (5)
Question: 2
Steel Co Ltd is one of the largest producers of steel in South Africa. Its major competitor is Steel Wo...
LML4806
Assignment 2 Semester 2 – 2023
Unique Number: NA
Question: 1
With reference to appropriate authority, discuss the appointment and
composition of the social and ethics committee. (5)
In certain circumstances companies are required to appoint a social and ethics
committee where it is desirable in the public interest, having regard to (i) the annual
turnover; (ii) workforce size; or (iii) the nature and extent of the activities of such
companies.1 Regulation 43(1) of the Regulations requires a state-owned company and
a listed public company to appoint a social and ethics committee. In addition, any other
company that has in any two of its previous five years scored above 500 points in the
calculation of its public interest score is required to appoint a social and ethics
committee.
The committee must comprise at least three directors or prescribed officers of the
company, at least one of whom must be a director who is not involved in the day-to-
day management of the company’s business, and must not have been so involved
within the previous three financial years.2
1
Section 72(4) of the Companies Act.
2
Regulation 43(4).
, Question: 2
Steel Co Ltd is one of the largest producers of steel in South Africa. Its major
competitor is Steel Works Ltd, which operates several steel manufacturing
plants across South Africa. Steel Co Ltd and all its related persons do not
control any voting rights in Steel Works Ltd.
Steel Co Ltd and Steel Works Ltd have concluded an agreement in terms of
which Steel Co Ltd will acquire and hold all the assets and liabilities of Steel
Works Ltd for R300 million (“the Transaction”). The material terms of the
Transaction include that Steel Co Ltd will pay the shareholders of Steel Works
Ltd a cash consideration of R10.00 for each Steel Works Ltd share held and that,
pursuant to the implementation of the Transaction, Steel Works Ltd will be
deregistered.
Over the past five years, Steel Works Ltd’s operational and financial
performance have been declining due to increasing working capital
requirements. The company obtained a loan of R200 million from the
Commercial Bank of South Africa, which it has not yet repaid, in order to fund
its increased working capital requirements.
At a shareholders’ meeting to consider the Transaction proposed by the board,
83% of the shareholders of Steel Works Ltd vote in favour of the Transaction.
However, certain shareholders, who hold 17% of the general voting rights in
Steel Works Ltd, vote against the Transaction as they are dissatisfied with the
strategic rationale for the Transaction as well as the cash consideration of
R10.00 per share, which they believe does not provide them with an opportunity
to realise at least the fair value for their shares.
With reference to the facts provided and the Companies Act 71 of 2008:
3.1 Identify the type of transaction that is contemplated in the scenario above.
(2)
This form of this transaction is an amalgamation or merger3
3
Section 1 of the Companies Act of 2008
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