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, 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.
In the scenario described, the transaction involving Mandla, Cargo Logistics Ltd, and the
rental of a warehouse raises questions about whether Cargo Logistics Ltd has provided
financial assistance for the purchase of its securities. The issue revolves around the
concept of financial assistance, particularly in the context of share acquisitions.
The Companies Act, statutory provisions, and relevant case law come into play.
1. Companies Act Provisions: -
Section 44(2): This section prohibits a company from providing financial assistance for the
purpose of or in connection with the purchase of its own shares, or the shares of its holding
company.1
Section 45: Provides exceptions to the prohibition, allowing financial assistance if certain
requirements are met, such as a special resolution of shareholders.2
1
Companies Act 71 of 2008.
2
Companies Act 71 of 2008.
