LML4806 Assignment 1 Semester 1 2026 (Answer Guide) - DUE 2026

LML4806 Assignment 1 Semester 1 2026 (Answer Guide) - DUE 2026

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UNISA, 2025



Question: 1

Multicuisine Ltd wishes to sell shares to a newly incorporated company called
Multicuisine Ramatla (RF) Ltd to enable Multicuisine Ltd to comply with Broad-Based
Black Economic Empowerment (BBBEE) legislation in South Africa. Multicuisine
Ramatla (RF) Ltd does not have the money to pay for the shares. Multicuisine Ltd
provides a loan of R85 million to Multicuisine Ramatla (RF) Ltd, and Multicuisine Ramatla
(RF) Ltd uses the loan to purchase 850 000 ordinary shares in Multicuisine Ltd. This loan
is to be repaid over a period of 10 years by using the dividends declared by Multicuisine
Ltd.

With reference to the Companies 71 of 2008 and appropriate authority, indicate the type
of company that Multicuisine Ramatla (RF) Ltd falls under and discuss in detail whether
Multicuisine
Ltd has provided financial assistance for the purchase of its securities.
(10)

Question 1 Answers

Introduction

Multicuisine Ltd intends to comply with South Africa’s Broad-Based Black Economic
Empowerment (BBBEE) requirements by selling shares to a newly incorporated
company, Multicuisine Ramatla (RF) Ltd. Since Multicuisine Ramatla (RF) Ltd lacks
the financial capacity to acquire the shares, Multicuisine Ltd advances a loan of R85
million, which is used to purchase 850 000 ordinary shares in Multicuisine Ltd. The
loan is repayable over 10 years, using dividends declared by Multicuisine Ltd.

This question requires an analysis of:

, 1. The type of company Multicuisine Ramatla (RF) Ltd is; and

2. Whether the loan constitutes financial assistance by Multicuisine Ltd for the
acquisition of its own securities.

(a) Type of company: Multicuisine Ramatla (RF) Ltd

Legal framework

The Companies Act 71 of 2008 recognises several types of companies. Of particular
relevance is section 8(2)(c), which provides for a profit company with restrictive
conditions, commonly referred to as an RF (ring-fenced) company.

An RF company is a profit company whose Memorandum of Incorporation (MOI)
contains restrictive conditions, which may:

 Limit the activities of the company;

 Restrict the transfer of shares; or

 Require the company to pursue a specific objective.

The letters “RF” must appear as part of the company’s name to alert third parties to
these restrictions.¹

Application to the facts

Multicuisine Ramatla (RF) Ltd:

 Is newly incorporated;

 Is intended to serve a BBBEE ownership structure; and

 Acquires shares in Multicuisine Ltd using vendor finance.

These characteristics strongly indicate that:

 The company is a profit company; and

 Its MOI is likely to restrict its activities to holding shares in Multicuisine Ltd, a
common structure in BBBEE transactions.