Exam (elaborations)
LML4806 Assignment 1 Semester 1 2024.
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- University Of South Africa
LML4806 Assignment 1 Semester 1 2024.
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LML4806Assignment 1
Semester 1
2024
ADMIN
[COMPANY NAME]
, 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. (6) 4
The scenario described raises the question of whether Cargo
Logistics Ltd has provided financial assistance for the purchase of its
securities, which is a matter regulated in many jurisdictions to
protect the interests of shareholders and maintain the integrity of
the financial system.
Financial assistance typically involves a company providing funds,
loans, or guarantees to assist a person in acquiring shares in that
company. The relevant provisions often aim to prevent companies
from using their resources to manipulate their own share prices or
undermine the financial interests of shareholders.
In the scenario given:
1. Mandla's Role as Director and Shareholder:
Mandla is both a director and a shareholder of Cargo Logistics
Ltd. This is significant because the legal duties of directors
often include acting in the best interests of the company and
its shareholders. Any actions taken by Mandla, especially when
involving financial transactions, may be subject to scrutiny in
light of these duties.
2. Renting Warehouse and Purchase of Shares:
Mandla offers to rent a warehouse to Cargo Logistics Ltd at a
rate of R1.2 million per annum.
Cargo Logistics Ltd agrees to pay this rent.
Mandla then uses part of the rent money to purchase 10,000
shares in Cargo Logistics Ltd.
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