LML4806
Assignment 1
Semester 1 2026
Due March 2026
,Question 1: Type of company and financial assistance
Q1a: With reference to the Companies Act 71 of 2008 and appropriate authority,
indicate the type of company that Multicuisine Ramatla (RF) Ltd falls under.
Answer:
Multicuisine Ramatla (RF) Ltd is a private company. According to the Companies Act
71 of 2008 (the Act), a private company is defined in Section 8(1)(b) as a company
that:
1. Does not offer its shares to the public.
2. Has restrictions on the transferability of its shares.
3. Limits the number of shareholders to 50, excluding employees of the company
(Section 8(2)(b)).
In this scenario:
• Multicuisine Ramatla (RF) Ltd is newly incorporated for the purpose of
purchasing shares in Multicuisine Ltd. It is not listed on any stock
exchange and its shares are not available to the public, satisfying the first
criterion.
• Being a small empowerment entity, it will likely have restricted shareholders
and therefore meets the shareholder limitation requirement.
• The purpose of the incorporation is specific (to comply with BBBEE obligations),
indicating that share transfers are likely restricted, which aligns with private
company characteristics.
Conclusion: Based on the facts and the definitions in the Companies Act 71 of 2008,
Multicuisine Ramatla (RF) Ltd qualifies as a private company (Pty) Ltd (Companies
Act 71 of 2008, s8(1)(b)).
, Q1b: Discuss in detail whether Multicuisine Ltd has provided financial assistance
for the purchase of its securities.
Answer:
The key issue here is whether Multicuisine Ltd’s loan to Multicuisine Ramatla (RF)
Ltd constitutes “financial assistance” for the purpose of acquiring its own shares, as
defined in the Companies Act 71 of 2008.
Step 1: Define financial assistance under the Act
• Section 44 of the Companies Act 71 of 2008 states that a company may not
provide financial assistance directly or indirectly to a person for the purpose of
acquiring securities issued by the company or a related company, unless the
conditions set out in Section 44(3) and 44(4) are met.
• Financial assistance includes:
o Loans, guarantees, or any other form of financial support.
o Assistance is not limited to cash; it can also be providing security or
facilitating payment.
Step 2: Application to the scenario
In this case:
• Multicuisine Ltd provides a loan of R85 million to Multicuisine Ramatla (RF)
Ltd.
• Multicuisine Ramatla (RF) Ltd uses this loan to purchase 850,000 ordinary
shares in Multicuisine Ltd.
• The loan is structured to be repaid using dividends declared by Multicuisine Ltd.
Analysis:
• The loan is directly used to acquire shares in Multicuisine Ltd.
Assignment 1
Semester 1 2026
Due March 2026
,Question 1: Type of company and financial assistance
Q1a: With reference to the Companies Act 71 of 2008 and appropriate authority,
indicate the type of company that Multicuisine Ramatla (RF) Ltd falls under.
Answer:
Multicuisine Ramatla (RF) Ltd is a private company. According to the Companies Act
71 of 2008 (the Act), a private company is defined in Section 8(1)(b) as a company
that:
1. Does not offer its shares to the public.
2. Has restrictions on the transferability of its shares.
3. Limits the number of shareholders to 50, excluding employees of the company
(Section 8(2)(b)).
In this scenario:
• Multicuisine Ramatla (RF) Ltd is newly incorporated for the purpose of
purchasing shares in Multicuisine Ltd. It is not listed on any stock
exchange and its shares are not available to the public, satisfying the first
criterion.
• Being a small empowerment entity, it will likely have restricted shareholders
and therefore meets the shareholder limitation requirement.
• The purpose of the incorporation is specific (to comply with BBBEE obligations),
indicating that share transfers are likely restricted, which aligns with private
company characteristics.
Conclusion: Based on the facts and the definitions in the Companies Act 71 of 2008,
Multicuisine Ramatla (RF) Ltd qualifies as a private company (Pty) Ltd (Companies
Act 71 of 2008, s8(1)(b)).
, Q1b: Discuss in detail whether Multicuisine Ltd has provided financial assistance
for the purchase of its securities.
Answer:
The key issue here is whether Multicuisine Ltd’s loan to Multicuisine Ramatla (RF)
Ltd constitutes “financial assistance” for the purpose of acquiring its own shares, as
defined in the Companies Act 71 of 2008.
Step 1: Define financial assistance under the Act
• Section 44 of the Companies Act 71 of 2008 states that a company may not
provide financial assistance directly or indirectly to a person for the purpose of
acquiring securities issued by the company or a related company, unless the
conditions set out in Section 44(3) and 44(4) are met.
• Financial assistance includes:
o Loans, guarantees, or any other form of financial support.
o Assistance is not limited to cash; it can also be providing security or
facilitating payment.
Step 2: Application to the scenario
In this case:
• Multicuisine Ltd provides a loan of R85 million to Multicuisine Ramatla (RF)
Ltd.
• Multicuisine Ramatla (RF) Ltd uses this loan to purchase 850,000 ordinary
shares in Multicuisine Ltd.
• The loan is structured to be repaid using dividends declared by Multicuisine Ltd.
Analysis:
• The loan is directly used to acquire shares in Multicuisine Ltd.
