Summary
Summary LML4806 REVISION NOTES
- Institution
- University Of South Africa (Unisa)
Company law revision study notes
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1Abbreviations:
MOI - Memorandum of Incorporation
TB - Companies and other Business Structures 3rd edition (Textbook)
(normally in footnotes)
MO001 - MO001/4/2016 (Module Online Company Law ‘Study Guide’) (normally
in footnotes
BR - Business rescue
Question
Lesego is a director of One Stop Groceries (Pty) Ltd. When the company
needed to appoint a new marketing agent to advertise its products in Gauteng,
Lesego persuaded the board to appoint ‘The Best CC’ by convincing them that
The Best CC would be ideal for this task. However, Lesego did not disclose the
fact that his brother had a substantial member’s interest in The Best CC. The
Best CC was appointed, but a few months later it became clear that One Stop
Groceries (Pty) had suffered substantial losses in Gauteng because its
products were not being advertised effectively, since The Best CC had no
experience in this type of work. A number of shareholders in One Stop
Groceries (Pty) ltd now want to hold the company’s directors liable for breach
of their duty to act in the best interest of the company and their duty to care,
skill and diligence by appointing an inexperienced close corporation as their
marketing agent.
Advise Lesego and the other directors of One Stop Groceries (Pty) Ltd on
whether they can escape liability on the basis of the business judgment rule.
Duties as Directors
Section 76 requires a director to act in good faith and in the best interest of the
company1. A director should act with the degree of care, skill and diligence that may
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