0|P a g e
2023
LML4806 M ANY
LA
BMSA LAW TUTORSGAMECHANGER
, 1|P a g e
QUESTION: 1
Musa, Amos, Sipho and Jimmy are directors of Khubo Limited. Jimmy was
appointed as an executive director of Khubo Limited three years ago under a
five-year contract of employment with the company. Musa has expressed his
concerns to the board of directors that for the past two financial years Jimmy
has been failing to ensure the timely preparation and submission of the
company’s annual financial statements, and that Jimmy omitted to sign the
annual financial statements for the previous financial year as the authorised
director, as required. Musa has also informed the board of directors that, after
joining Khubo Limited, Jimmy was removed as chairperson of the board of
trustees of the JF Pension Fund after he forged some documents and
withdrew R2 million from the JF Pension Fund’s bank account for his
personal use. Advise Jimmy on the following:
1.1. Whether under the circumstances of this case the board of directors of
Khubo Limited will have valid grounds to remove him (Jimmy) as a
director of the company.
A director may be removed by shareholders and in some circumstances, by the
board of directors. A director may be removed by an ordinary resolution adopted at a
shareholders meeting.
The grounds upon which a director may be removed by a resolution of the board are
as follows:
i A director of the company has become ineligible or disqualified
ii Where a director has become incapacitated
iii The director is no longer resident within the republic in circumstances in
which there are no other directors resident within the republic
iv Has neglected or has been derelict in the performance of the functions of a
director.
A director who fails to perform their duties as prescribed by the common law and the
1
Companies Act may be declared a delinquent director. Section 162(5) of the Act
prescribes when a board member should be declared a delinquent director. This
1 Companies Act 71 of 2008
2023
LML4806 M ANY
LA
BMSA LAW TUTORSGAMECHANGER
, 1|P a g e
QUESTION: 1
Musa, Amos, Sipho and Jimmy are directors of Khubo Limited. Jimmy was
appointed as an executive director of Khubo Limited three years ago under a
five-year contract of employment with the company. Musa has expressed his
concerns to the board of directors that for the past two financial years Jimmy
has been failing to ensure the timely preparation and submission of the
company’s annual financial statements, and that Jimmy omitted to sign the
annual financial statements for the previous financial year as the authorised
director, as required. Musa has also informed the board of directors that, after
joining Khubo Limited, Jimmy was removed as chairperson of the board of
trustees of the JF Pension Fund after he forged some documents and
withdrew R2 million from the JF Pension Fund’s bank account for his
personal use. Advise Jimmy on the following:
1.1. Whether under the circumstances of this case the board of directors of
Khubo Limited will have valid grounds to remove him (Jimmy) as a
director of the company.
A director may be removed by shareholders and in some circumstances, by the
board of directors. A director may be removed by an ordinary resolution adopted at a
shareholders meeting.
The grounds upon which a director may be removed by a resolution of the board are
as follows:
i A director of the company has become ineligible or disqualified
ii Where a director has become incapacitated
iii The director is no longer resident within the republic in circumstances in
which there are no other directors resident within the republic
iv Has neglected or has been derelict in the performance of the functions of a
director.
A director who fails to perform their duties as prescribed by the common law and the
1
Companies Act may be declared a delinquent director. Section 162(5) of the Act
prescribes when a board member should be declared a delinquent director. This
1 Companies Act 71 of 2008
