LML4806 Assignment 2
Due 15 April 2024
Guaranteed Distinction
Question and Answers
, Question 1
Coffee Bean Lovers (Pty) Ltd (‘the company’) buys coffee from Kenya and distributes it
to different coffee shops in South Africa. Due to an infestation of bugs at one of the
coffee plantations, the company will not be able to get deliveries of coffee from Kenya
for the next three months. Instead, the company will have to import coffee from Uganda
at a much higher cost. As a result, the company’s cash flow will be affected severely.
Pat, one of the directors of Coffee Bean Lovers (Pty) Ltd, has informed Jane and Steven,
two of the employees of the company, that the company may face serious financial
difficulties in the next three to twelve months and that they will not be paid their salaries
for the next two months as the company will first have to pay other creditors. Jane and
Steven have heard about business rescue, and are of the view that business rescue 4
proceedings may be appropriate in the circumstances to assist the company to survive
and to ensure that they will still be paid their salaries. Jane and Steven approach you for
advice on business rescue proceedings. With reference to the relevant statutory
provisions:
1.1 Explain what business rescue is and indicate the circumstances in which business
rescue proceedings may be used. (5)
1.2 Advise Jane and Steven how business rescue proceedings may be commenced and
indicate whether Jane and Steven, in their capacity as employees, would have any
means of ensuring that the business rescue proceedings are commenced. (5)
Question Two
Springboard (Pty) Ltd and Scapegoat (Pty) Ltd have concluded an agreement in terms of
which these two companies will merge and consolidate their businesses because they
are competing in a small market. The material terms of the agreement include that the
two existing companies will cease to exist after the merger and a new company,
Togetherness (Pty) Ltd, will hold all the assets and liabilities of the two merging
companies. Furthermore, the shareholders of Springboard (Pty) Ltd will receive a share
consideration of one share in Togetherness (Pty) Ltd for every three shares they hold in
Springboard (Pty) Ltd. The board of Springboard (Pty) Ltd holds separate informal
discussions with all the shareholders of Springboard (Pty) Ltd regarding the proposed
merger ahead of a scheduled shareholders’ meeting to consider and, if appropriate,
approve the merger. During the informal discussions, the shareholders holding about
80% of the general voting rights in Springboard (Pty) Ltd indicate that they will support
the merger. However, a group of shareholders holding between 10% and 20% of the
Due 15 April 2024
Guaranteed Distinction
Question and Answers
, Question 1
Coffee Bean Lovers (Pty) Ltd (‘the company’) buys coffee from Kenya and distributes it
to different coffee shops in South Africa. Due to an infestation of bugs at one of the
coffee plantations, the company will not be able to get deliveries of coffee from Kenya
for the next three months. Instead, the company will have to import coffee from Uganda
at a much higher cost. As a result, the company’s cash flow will be affected severely.
Pat, one of the directors of Coffee Bean Lovers (Pty) Ltd, has informed Jane and Steven,
two of the employees of the company, that the company may face serious financial
difficulties in the next three to twelve months and that they will not be paid their salaries
for the next two months as the company will first have to pay other creditors. Jane and
Steven have heard about business rescue, and are of the view that business rescue 4
proceedings may be appropriate in the circumstances to assist the company to survive
and to ensure that they will still be paid their salaries. Jane and Steven approach you for
advice on business rescue proceedings. With reference to the relevant statutory
provisions:
1.1 Explain what business rescue is and indicate the circumstances in which business
rescue proceedings may be used. (5)
1.2 Advise Jane and Steven how business rescue proceedings may be commenced and
indicate whether Jane and Steven, in their capacity as employees, would have any
means of ensuring that the business rescue proceedings are commenced. (5)
Question Two
Springboard (Pty) Ltd and Scapegoat (Pty) Ltd have concluded an agreement in terms of
which these two companies will merge and consolidate their businesses because they
are competing in a small market. The material terms of the agreement include that the
two existing companies will cease to exist after the merger and a new company,
Togetherness (Pty) Ltd, will hold all the assets and liabilities of the two merging
companies. Furthermore, the shareholders of Springboard (Pty) Ltd will receive a share
consideration of one share in Togetherness (Pty) Ltd for every three shares they hold in
Springboard (Pty) Ltd. The board of Springboard (Pty) Ltd holds separate informal
discussions with all the shareholders of Springboard (Pty) Ltd regarding the proposed
merger ahead of a scheduled shareholders’ meeting to consider and, if appropriate,
approve the merger. During the informal discussions, the shareholders holding about
80% of the general voting rights in Springboard (Pty) Ltd indicate that they will support
the merger. However, a group of shareholders holding between 10% and 20% of the
