LML4806 - Company Law: Exam Preparation Questions and answers - This was obtained from class discussions, you are also given guidelines on how to answer the exam paper and most importantly what is required of you
LEARNING UNIT 1: SHAREHOLDER AND COMPANY MEETINGS
Question 1
Thinta is appointed to his first job as a company secretary of the newly
incorporated private company. On his first day at work, he is tasked to arrange
a general meeting of the company to be held in the next 10 days after the delivery
of the notice to all the shareholders. Thinta without reading the Companies Act
71 of 2008 (‘the Act’), prepares a notice of the shareholders meeting. In the
notice the meeting is scheduled only a week after the delivery of the notice to
all shareholders of the company and a copy of one of the resolutions which
should be considered in the meeting is not included. Tazi, a friend and a
colleague, informs Thinta that the notice is invalid as it does not comply with all
the requirements in terms of the Act and consequently the meeting cannot take
place.
Suppose the notice complies with other requirements of a notice of the meeting
in terms of the Act. With reference to relevant authority, advise Thinta on
whether Tazi is correct. When you refer to relevant authority, please use your
own words. A mere reproduction of what is written in the Act will not earn marks.
[10]
DEAR LML4086 STUDENT
Thanks very much for your participation in the discussion forum and please continue
to participate. My colleagues will continue to post questions and guidelines (feedback)
dealing with other learning units on a weekly basis.
Please see the proposed answer below. Please note how I have structured it. When
you answer problem - type questions, please try to structure your answers in the line
with the proposed answer below.
Answer 1
Identification of the problem and applicable sections of the Act (‘theory)
This question is about the delivery of notice of each shareholders meeting. It is
specifically about the required number of days that the notice of meeting should be
delivered before the date of the meeting in terms of section 62(1) of the Companies
Act 71 of 2008 (‘the Act’) and about the defect as a result of omitting to include a copy
of one of the resolutions which should be considered in the meeting as required in
terms of section 62(3) (c) of the Act.
Discussion of the applicable sections of the Act (theory)
Section 62(1) of the Act provides that a company should deliver the notice of every
shareholders meeting in compliance with all the requirements. It stipulates that in a
public company and Non – Profit Company, the notice should be delivered at least 15
days before the meeting and in any other case at least 10 days before the meeting.
However, section 62(2) (A) of the Act provides an exception to section 62(1) of the
Act. It states that a company may provide the notice of meeting with fewer days than
as required in section 62(1) of the Act or the companies MOI. This is on condition that
every person who is entitled to vote in any issue in the meeting is present at the
meeting and supports the motion to ignore the required number of days of the notice
of meeting.
Section 62(3) of the Act requires that the notice of shareholders meeting be
accompanied by a copy of the resolution of which the company has received notice
and the notice on the value of voting rights that are needed for the proposed resolution
to be adopted. Failure to include a copy of the resolution means that the notice
contains a material defect.
However, section 62(4) of the Act also provides a relief in circumstances where there
is a material defect. It provides that a material defect in delivering the notice of meeting
to shareholders may be ignored (subject to subsection (5) of the same section) only
on condition that every person who is entitled to vote in the any issue in the meeting
is available in the meeting and supports the motion to approve the acceptance of a
defective notice.
Section 62(5) of the Act provides that if the material defect of giving notice is about
one or more issues in the meeting, any such issue may be removed in the agenda of
the meeting and the notice be acceptable with respect to other issues to be considered
in the meeting. Furthermore, the meeting may continue to discuss the matter that has
been removed in the agenda of the meeting provided the defective notice has been
accepted in terms of section 62(4) of the Act.
NOTE THE MISTAKE IN THE ACT. IT REFERS TO SECTION 62(4) (d) AND THERE
IS NO (d). IT SHOULD ONLY BE SECTION 62 (4).
Application of the applicable sections (theory)
Firstly, although the number of days of the notice of the meeting is fewer than the
minimum number which is 10 days, section 62(2) (A) of the Act may save the notice
from invalidity. The conditions provided in section 62(2) (A) of the Act should be
complied with.
Secondly, although the copy of the resolution to be considered in the meeting is not
included in the notice of meeting, section 62(4) of the Act subject to subsection (5) of
the Act may save the notice from invalidity. The conditions provided in these sections
should be complied with.
Conclusion
Therefore, in view of what is discussed above, Tazi’s assertion that the meeting cannot
take place is incorrect.
See section 62 of the Act, M0001 letter on page 2 and the prescribed textbook paragraph
5.5
LEARNING UNIT 2
Dear Students
Welcome to the second topic of discussion, based on learning unit 2. The question
posted below deals with another organ of a company, which is a director. From the
discussion in learning unit 1, it is a clear that a company cannot operate on its own as
it is a non-living person. It therefore requires living persons to give it direction. This
learning unit will enlighten you on the relevant persons who are responsible for the
daily running of the company (directors) and those that are supposed to oversee the
actions taken by directors (board committees and company secretary).
Question:
Tom and Jerry are directors of Donald Duck Enterprise (Pty) Ltd. Donald Duck
Enterprise (Pty) Ltd have received a tax rebate from the Receiver of Revenue
services. As a director in charge of company finances, Jerry redirects the rebate
to his personal account. Upon discovery, Tom considers taking legal action
against Jerry for defrauding Donald Duck Enterprise. It is Tom’s position that
since this indiscretion has occurred more than once, Jerry should be prohibited
from ever holding a directorial position. With reference to the relevant provision
of the Companies Act, discuss which remedy resonates with Tom’s assertions.
In your answer, give an opinion on whether this remedy will achieve the desired
outcome.
Dear Students
I would like to convey my gratitude to students who took time and effort to participate
in this forum with me. It is highly appreciated.
To all other students registered for this module, you are encouraged to make full use
of this forum as it gives you an idea regarding the type of questions that you are going
to encounter during the examination session. It is our humble plea that you please
participate.
Chiga 3|P a ge
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