LML4806 Company Law Summary Notes Exam Q and A's

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COMPANY LAW QUESTIONS:

MEETINGS

QUESTION 1:
You are the company secretary of Best Life ltd. Advise Best life
ltd on the correct procedure of holding a general meeting in
terms of the companies act of 2008.Pay specific attention in your
answer to the following matter: -the provisions as to notice of
meetings (7 marks)

Notice of meetings: S62:
1. Must be in writing.
2. Include the date, time and place of the meeting.
3. Where the company set a record date for a meeting
4. The notice should explain the general purpose of the meeting
5. In a public company and a non-profit company that has voting
members, notice of a shareholder meeting should be given 15
business days before the date of the meeting. In any other
company the notice, convening the meeting must be sent ten
business days before the date of the meeting. The provisions of
the memorandum of Incorporation may prescribe longer
minimum notice.
6. A copy of any proposed resolution received by the company,
which is to be considered at the meeting, must accompany the
notice convening the meeting.
7. The notice must indicate the percentage of voting rights required
for the resolution to be adopted.
8. A notice convening the AGM of a company must contain a
summary of the financial statements that will be tabled at the
meeting.
9. A notice convening a meeting must contain a statement that a
shareholder is entitled to appoint a proxy
10. The notice should indicate that meeting participants will be
required to provide satisfactory proof of identity at the meeting.
Where the company has failed to give proper notice of the
meeting or there has been a defect in the giving of the notice, the
meeting may proceed if the persons who are entitled to vote in
respect of each item on the agenda are present at the meeting
and acknowledge actual receipt of the notice and agree to waive
notice of the meeting or in the case of a material defect, ratify the
defective notice.

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QUESTION 2:
The shareholders meeting of Best Life ltd is attended by Ms
Modiba who holds 10% of the voting rights, MS Masuku who holds
5% of the voting rights and Mr Lehloenya who holds 20% of the
voting rights in the company. Advise whether a quorum has been
met to allow the meeting to begin in terms of the company’s act
of 2008. (5 marks)

Quorum
A shareholders meeting may not begin until sufficient people are
present, in aggregate, exercise at least 25% of the voting rights that
are entitled to be exercised in respect of at least one matter to be
decided.
A company’s Memorandum of incorporation may specify a lower or
higher percentage than the 25%.
If a company has more than two shareholders and only two are
present, a meeting may not begin until at least three shareholders are
present.
YES there is more than 2 shareholders holding more than 25% of the
share capital

QUESTION 3:
Basil and Stephen were the only directors and shareholders of
Umgeni (pty) ltd. The memo of incorp of Umgeni (pty) ltd
provided that the remuneration of directors should be determined
from time to time by the company in a general meeting. No
resolution was ever passed authorizing the directors to receive
any remuneration. They withdrew money from the company’s
account and recorded that as director’s salaries. When the
company was wound up, the liquidator sought to recover from the
two directors the money paid to them.
Explain with reference to case law whether Basil and Stephen will
be liable to effect any repayments to the company. (10 marks)

Shareholders acting other than at a meeting
Act without holding a meeting

B4: don’t need to hold an AGM if all the members entitled to attend
consent in writing

Common law: unanimous assent:
Some decisions are valid without having a meeting if all the members
know of the facts and have assented to it

Gohlke: shareholders appointed a director without a formal meeting if
they have unanimous assent

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In re Deuomatic: approval of director’s salary by the 2 directors who
had majority of the voting rights in the co could be done by
unanimous assent

2008 Act: resolutions can be adopted in writing without a formal
meeting – if the required majority does it – it will be as if the meeting
was held.
BUT AGM can’t be conducted in this way

Based on the facts they are the only directors and shareholders so
under common law there would be unanimous assent.
In the new companies Act such consent given without a meeting must
be in WRITING

DIRECTORS

QUESTION 1:
Mandy is a director of Agridermn (pty) ltd. Agriderm (pty) ltd has
developed a new fertilizer Mandy gives the formula to a
competing company against payment of a fee.
Explain whether Agriderm (pty) ltd will be able to lodge an
application to have Mandy declared as a delinquent. If so explain
what the effect of such an order will be. (10 marks)

S162: DELINQUENCY/ PROBATION:
The following persons can apply to court for such an order: company,
shareholder, director, A company secretary or prescribed officer of a
company, A registered trade union that represents employees of the
company, Any other representative of the employees of company, The
commission AND The takeover regulation panel.

 Consents to be a director while ineligible
 Acted as director while under probation
 Abused his position as director
 Used information for personal capacity
 Gross negligence
 Breach of trust
 Failed to vote against a resolution which had to do with liquidity
and solvency

A person, who has been declared delinquent, other than where the
declaration is unconditional and subsists for the lifetime of the person
declared delinquent, may apply to a court:
 To suspend the order of delinquency and substitute an order of
probation, with or without conditions at any time more than 3
years after the order of delinquency was made;
 To set aside an order of delinquency at any time more than 2 years
after it was suspended as contemplated in above paragraph.