LML4806 Assignment 1 (ANSWERS) Semester 1 2024 - DISTINCTION GUARANTEED

LML4806 Assignment 1 (ANSWERS) Semester 1 2024 - DISTINCTION GUARANTEED Answers, guidelines, workings and references.............. Question: 1 Mandla is both a director and shareholder of Cargo Logistics Ltd. He wants to buy more shares in Cargo Logistics Ltd but does not have enough money to do so. He offers to rent out a warehouse to Cargo Logistics Ltd. Cargo Logistics Ltd agrees to pay R1.2 million per annum as rent for the warehouse. Mandla then uses part of the money to purchase 10 000 shares in Cargo Logistics Ltd. With reference to the relevant case law, statutory provisions and the facts provided in the above scenario, discuss whether Cargo Logistics Ltd has provided financial assistance for the purchase of its securities. (6) 4 Question: 2 You are an attorney at one of the leading corporate and commercial law firms in South Africa. You are approached by Mr Skunk, the chairperson of the board of directors of ATF Ltd, for legal advice. He informs you that certain shareholders of ATF Ltd and their proxies have expressed their concerns that all the ordinary resolutions proposed to be tabled for shareholder vote at the company’s upcoming annual general meeting raise serious statutory concerns. Study the following ordinary resolutions that have been extracted from the relevant notice of annual general meeting, including the notes regarding some of the resolutions in italics, and answer the question below. ORDINARY RESOLUTIONS FOR CONSIDERATION AND ADOPTION For ordinary resolutions number 1.1 to 4 to be approved by shareholders they must be supported by more than 50% of the voting rights exercised on the resolution. 1. Election of directors by ordinary resolutions Resolved that the following individuals be and are hereby elected as directors, as required by the Memorandum of Incorporation: 1.1 Mrs Meerkat 1.2 Mr Squirrel Notes: • Mrs Meerkat previously served as a director of Qhuba (Pty) Ltd. A disciplinary process conducted by the board of directors of Qhuba (Pty) Ltd concluded that Mrs Meerkat had been redirecting company funds meant to pay Qhuba (Pty) Ltd’s suppliers to her personal account. The board of directors of Qhuba (Pty) Ltd therefore removed Mrs Meerkat from her office as a director on 15 January 2020. • Mr Squirrel was declared insolvent by the High Court in 2003. 2. Election of the audit committee by ordinary resolutions Resolved that the following individuals be and are hereby elected as members of the audit committee: 2.1 Mrs Fox 2.2 Miss Wolf 2.3 Mr Coyote Notes: • Mrs Fox is a non-executive director of ATF Ltd. She served as the financial director of ATF Ltd’s wholly-owned subsidiary called Britz (Pty) Ltd until she resigned from that position on 31 July 2022. • Miss Wolf is the managing director of ATF Ltd. • Mr Coyote is not a director of ATF Ltd. The board believes that the election of Mr Coyote to the audit committee will benefit the company as he has over 10 years’ experience as a partner of one of the big accounting and auditing firms. 3. Re-appointment of auditor by ordinary resolution Karoo Inc. is hereby re-appointed as the independent registered auditors until the next Annual General Meeting (noting that Mr Civet is the individual registered auditor who will undertake the audit in respect of the ensuing financial year) as recommended by the audit committee. 5 Notes: • Mr Civet has undertaken the audit of ATF Ltd as the individual registered auditor of Karoo Inc. continuously since December 2018. 4. Repurchase of shares by the company and/or subsidiary Resolved that ATF Ltd and/or any subsidiary of ATF Ltd be and are hereby authorised to acquire up to 3% of the issued ordinary shares of ATF Ltd that are held by its directors and prescribed officers. With reference to the relevant statutory provisions, the facts and the information provided in the extract from the notice of the annual general meeting above, advise Mr Skunk on whether the claim that all the proposed ordinary resolutions raise serious statutory concerns has any merit. (You should deal with each ordinary resolution separately in your answer).