LML4806 Assignment 2
(ANSWERS) Semester 2 2023 -
GUARANTEED DISTINCTION
Good grades.
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 ...
LML4806 Assignment 2
(ANSWERS) Semester 2 2023 -
GUARANTEED DISTINCTION
Good grades.
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 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 4 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)
3.2 Advise the shareholders of Steel Works Ltd who voted against the resolution to approve the
Transaction on whether they may seek court intervention in the event that the board of directors
proceeds to implement the Transaction. (8)
3.3 Advise the Commercial Bank of South Africa on the protections that the Companies Act 71 of 2008
provides to it if the Transaction is implemented. (5)
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