AUE1601
EXAM PACK
, lOMoARcPSD|21997160
QUESTION 1 50 marks
PART 1
(a) The company secretary may resign by giving one month’s written notice, or less than one
month with the approval of the board. (2)
(b)
Only Nylon (Pty) Ltd will be eligible for appointment. (1)
The Companies Act allows for a juristic person to be appointed company secretary
provided that
– no employee of the juristic person is disqualified from acting as a director of that
company (no information to imply that either of them are disqualified); (1)
– at least one of the employees is a resident in the Republic (both are); and (1)
– at least one of the employees has the requisite knowledge of and experience in
relevant laws (both are). (1)
Both Mr Denim and Mr Jeans meet all of these criteria and there are no other
employees. (1)
Even though Mr Suede has the necessary experience and skills, he cannot be appointed
as the Act requires the company secretary to be a resident in the Republic and to remain
so while serving in that capacity. (1)
Even though Mrs Silk is a South African resident who holds the necessary skills and
experience, she has been declared delinquent from being appointed as a director. The
Act states that a person who is disqualified from acting as a director is also disqualified
from being appointed company secretary. (2)
As the auditor of the company, Miss Corduroy cannot be appointed as a prescribed
officer of the company. (2)
Max 7
(c)
As your company is a public company you are required by the Act to appoint a
company secretary. (2)
The duties of the secretary include
providing the directors of the company collectively and individually with guidance as
to their duties, responsibilities and powers; (1)
making the directors aware of any law relevant to or affecting the company; (1)
reporting to the company’s board any failure on the part of the company or a director
to comply with the memorandum of incorporation or rules of the company or the Act;
(1)
ensuring that minutes of the following are properly recorded in accordance with the
Act: (1)
o shareholders’ meetings; (1)
o board meetings; and (1)
o meetings of any committees of the directors; and (1)
o the company’s audit committee; (1)
, lOMoARcPSD|21997160
AUE1601/202/1/2023
certifying in the company’s annual financial statements whether the company has
filed required returns and notices in terms of the Act and whether all such returns and
notices appear to be true, correct and up to date; (1)
ensuring that a copy of the company’s annual financial statements is sent, in
accordance with the Act, to every person who is entitled to it; and (1)
carrying out the functions of a person designated in terms of section 33(3) of the Act.
(1)
Max 11
PART 2
(a)
Print-It (Pty) Ltd
Turnover: 180 (1 point for every 1 million or part thereof)
Third-party liabilities: 12 (1 point for every 1 million or part thereof)
Beneficial interest holders: 7 (1 point for every known beneficial interest holder)
Average number of employees: 180 (1 point for avg number of employees: 150+20+10)
Public interest score: 379 (5)
Ink-R-Us (Pty) Ltd
Turnover: 8 (1 point for every 1 million or part thereof)
Third-party liabilities: 0 (1 point for every 1 million or part thereof)
Beneficial interest holders: 7 (1 point for every known beneficial interest holder)
Average number of employees: 8 (1 point for avg number of employees:150+20+10)
Public interest score: 23 (5)
Max 8
(b)
Print-It (Pty) Ltd will have to have its AFS audited. (1)
Reason: Public interest score falls in the range of ‘350 or more’ (379), which means an audit
is required for a private company. (1)
Ink-R-Us (Pty) Ltd will also have to have its AFS audited. (1)
Reason: Even though its public interest score falls in the range of ‘less than 100’ (23 – which
for a private company means an independent review in terms of regulation 29,
regardless of whether the AFS are compiled internally or independently), Ink-R-Us (Pty)
Ltd holds assets in fiduciary capacity exceeding R5 million. (2)
Max 4
(c) It means that all the shareholders are also directors of the company. (1)
PART 3
1. Diamond Inc: As they are a firm of registered auditors, they have the necessary
‘professional’ qualifications and as they are currently the auditors, they must satisfy the
independence requirements, i.e. no financial interest, no day-to-day involvement etc.
3
, lOMoARcPSD|21997160
However, if Dazzle (Pty) Ltd requires them to perform the independent review, they cannot
in terms of regulation 29 be appointed to compile the AFS. (2)
2. Ruby (Pty) Ltd: The company can be appointed as it satisfies the ‘professional accountant’
requirement. In terms of regulation 27, an independent accounting professional includes a
qualified person to be appointed as an accounting officer of a close corporation. All the
directors are CA(SA)s (which is an accredited body) and therefore the company can be
appointed as an accounting officer. It follows that a company (a juristic person) can be
appointed as an independent accounting professional. As neither the directors nor the
company have any involvement with Dazzle (Pty) Ltd, the company also satisfies the
‘independent’ requirement. (2)
3. Pearl Rock: Despite her expertise in financial reporting, she is not a member of any
professional body and is therefore not eligible for appointment. (2)
4. Emerald Stone: As a registered auditor, she satisfies the professional accountant
requirement but is not independent; she is related (by definition) to a full-time executive
employee (Sapphire Shine) of Dazzle (Pty) Ltd (regulation 27). (2)
5. Crystal Bling: As a chartered accountant or registered auditor, she satisfies the
‘professional accountant’ requirement but cannot be regarded as independent. Her sibling,
Sterling Topaz, is one of the shareholders of Dazle (Pty) Ltd. She is therefore related (as
defined) to a person who has a financial interest in Dazzle (Pty) Ltd and is disqualified in
terms of regulation 27. (2)
PART 4
(a) Shareholders holding at least 10% of the voting rights in the company would have had to
propose the amendment. (1)
At a properly constituted (notice, quorum) meeting of the shareholders, the resolution
would have been voted on as a special resolution and the motion passed by 75% of the
voting rights cast. (The MOI may stipulate a different percentage.) (2)
The amendment with a Notice of Amendment must be filed with the Commission (1)
Max 2
(b) Sarvesh is a CA(SA) and registered with the IRBA, as is required. (2)
The fact that he did vacation work does not exclude him in terms of section 90 of the
Companies Act. This ‘connection’ to the company is unlikely to threaten or be seen to
threaten his independence in terms of the Code of Professional Conduct. (2)
However, the fact that his father is a shareholder of the company may pose a self-
interest threat to his independence and it should be considderd whether he could be
safeguarded against this threat. (3)
It is thus unlikely that he would be elligalbe (or other logical conclusion). (1)
Max 5
EXAM PACK
, lOMoARcPSD|21997160
QUESTION 1 50 marks
PART 1
(a) The company secretary may resign by giving one month’s written notice, or less than one
month with the approval of the board. (2)
(b)
Only Nylon (Pty) Ltd will be eligible for appointment. (1)
The Companies Act allows for a juristic person to be appointed company secretary
provided that
– no employee of the juristic person is disqualified from acting as a director of that
company (no information to imply that either of them are disqualified); (1)
– at least one of the employees is a resident in the Republic (both are); and (1)
– at least one of the employees has the requisite knowledge of and experience in
relevant laws (both are). (1)
Both Mr Denim and Mr Jeans meet all of these criteria and there are no other
employees. (1)
Even though Mr Suede has the necessary experience and skills, he cannot be appointed
as the Act requires the company secretary to be a resident in the Republic and to remain
so while serving in that capacity. (1)
Even though Mrs Silk is a South African resident who holds the necessary skills and
experience, she has been declared delinquent from being appointed as a director. The
Act states that a person who is disqualified from acting as a director is also disqualified
from being appointed company secretary. (2)
As the auditor of the company, Miss Corduroy cannot be appointed as a prescribed
officer of the company. (2)
Max 7
(c)
As your company is a public company you are required by the Act to appoint a
company secretary. (2)
The duties of the secretary include
providing the directors of the company collectively and individually with guidance as
to their duties, responsibilities and powers; (1)
making the directors aware of any law relevant to or affecting the company; (1)
reporting to the company’s board any failure on the part of the company or a director
to comply with the memorandum of incorporation or rules of the company or the Act;
(1)
ensuring that minutes of the following are properly recorded in accordance with the
Act: (1)
o shareholders’ meetings; (1)
o board meetings; and (1)
o meetings of any committees of the directors; and (1)
o the company’s audit committee; (1)
, lOMoARcPSD|21997160
AUE1601/202/1/2023
certifying in the company’s annual financial statements whether the company has
filed required returns and notices in terms of the Act and whether all such returns and
notices appear to be true, correct and up to date; (1)
ensuring that a copy of the company’s annual financial statements is sent, in
accordance with the Act, to every person who is entitled to it; and (1)
carrying out the functions of a person designated in terms of section 33(3) of the Act.
(1)
Max 11
PART 2
(a)
Print-It (Pty) Ltd
Turnover: 180 (1 point for every 1 million or part thereof)
Third-party liabilities: 12 (1 point for every 1 million or part thereof)
Beneficial interest holders: 7 (1 point for every known beneficial interest holder)
Average number of employees: 180 (1 point for avg number of employees: 150+20+10)
Public interest score: 379 (5)
Ink-R-Us (Pty) Ltd
Turnover: 8 (1 point for every 1 million or part thereof)
Third-party liabilities: 0 (1 point for every 1 million or part thereof)
Beneficial interest holders: 7 (1 point for every known beneficial interest holder)
Average number of employees: 8 (1 point for avg number of employees:150+20+10)
Public interest score: 23 (5)
Max 8
(b)
Print-It (Pty) Ltd will have to have its AFS audited. (1)
Reason: Public interest score falls in the range of ‘350 or more’ (379), which means an audit
is required for a private company. (1)
Ink-R-Us (Pty) Ltd will also have to have its AFS audited. (1)
Reason: Even though its public interest score falls in the range of ‘less than 100’ (23 – which
for a private company means an independent review in terms of regulation 29,
regardless of whether the AFS are compiled internally or independently), Ink-R-Us (Pty)
Ltd holds assets in fiduciary capacity exceeding R5 million. (2)
Max 4
(c) It means that all the shareholders are also directors of the company. (1)
PART 3
1. Diamond Inc: As they are a firm of registered auditors, they have the necessary
‘professional’ qualifications and as they are currently the auditors, they must satisfy the
independence requirements, i.e. no financial interest, no day-to-day involvement etc.
3
, lOMoARcPSD|21997160
However, if Dazzle (Pty) Ltd requires them to perform the independent review, they cannot
in terms of regulation 29 be appointed to compile the AFS. (2)
2. Ruby (Pty) Ltd: The company can be appointed as it satisfies the ‘professional accountant’
requirement. In terms of regulation 27, an independent accounting professional includes a
qualified person to be appointed as an accounting officer of a close corporation. All the
directors are CA(SA)s (which is an accredited body) and therefore the company can be
appointed as an accounting officer. It follows that a company (a juristic person) can be
appointed as an independent accounting professional. As neither the directors nor the
company have any involvement with Dazzle (Pty) Ltd, the company also satisfies the
‘independent’ requirement. (2)
3. Pearl Rock: Despite her expertise in financial reporting, she is not a member of any
professional body and is therefore not eligible for appointment. (2)
4. Emerald Stone: As a registered auditor, she satisfies the professional accountant
requirement but is not independent; she is related (by definition) to a full-time executive
employee (Sapphire Shine) of Dazzle (Pty) Ltd (regulation 27). (2)
5. Crystal Bling: As a chartered accountant or registered auditor, she satisfies the
‘professional accountant’ requirement but cannot be regarded as independent. Her sibling,
Sterling Topaz, is one of the shareholders of Dazle (Pty) Ltd. She is therefore related (as
defined) to a person who has a financial interest in Dazzle (Pty) Ltd and is disqualified in
terms of regulation 27. (2)
PART 4
(a) Shareholders holding at least 10% of the voting rights in the company would have had to
propose the amendment. (1)
At a properly constituted (notice, quorum) meeting of the shareholders, the resolution
would have been voted on as a special resolution and the motion passed by 75% of the
voting rights cast. (The MOI may stipulate a different percentage.) (2)
The amendment with a Notice of Amendment must be filed with the Commission (1)
Max 2
(b) Sarvesh is a CA(SA) and registered with the IRBA, as is required. (2)
The fact that he did vacation work does not exclude him in terms of section 90 of the
Companies Act. This ‘connection’ to the company is unlikely to threaten or be seen to
threaten his independence in terms of the Code of Professional Conduct. (2)
However, the fact that his father is a shareholder of the company may pose a self-
interest threat to his independence and it should be considderd whether he could be
safeguarded against this threat. (3)
It is thus unlikely that he would be elligalbe (or other logical conclusion). (1)
Max 5
