LML4806 Company Law Question and Correct Answers

LML4806 Company Law Question and Correct Answers -Company Secretary - ANSWER-- public & state owned company are obliged to appoint one - company must maintain record of company secretaries - secretary is chief administration officer - should be someone with knowledge of and experience in relevant legislation - accountable to board of directors - duties - guide directors on duties; powers & responsibilities; make directors aware of law - board may adopt a resolution to remove company secretary Compromise - ANSWER-- agreement or arrangement or restructuring of claims between a company and its creditors in terms of which the creditors agree to accept less than their full claims against the company - binding on all companies creditors Compromise proposal is divided into three parts - ANSWER-- background - the proposal itself - assumptions and conditions Corporate social responsibility - ANSWER-- Seeks to make companies responsible members of the community - Businesses have a responsibility towards the societies in which they operate and that this responsibility needs to be managed - Voluntary commitment by companies to manage their role within society responsibly - marks a departure from the traditional perception that the only object of business is to make profits - eg purpose of CA is to promote development of SA economy by encouraging transparency, and high standards of corporate governance - CA seeks to reaffirm the concept of the company as a means of achieving economic and social benefits - CA seeks to promote development of companies within all sectors of the economy & to encourage active participation in economic organisation, management and productivity - CA seeks to encourage efficient and responsible management of companies - CA provides for non profits that are incorporated for social activities, public benefit, cultural activities or group interest - CA may offer a wide circle of stakeholders - CA requires certain categories of companies to appoint a social and ethics committee to monitor company activities Delinquency - ANSWER-- S162(1) - person grossly abused the position of director - took personal advantage of info or an opportunity contrary to S76(2)(a) - intentionally or by gross negligence inflicted harm upon the company or subsidiary of company - acted in a manner that amounted to gross negligence, wilful misconduct or breach of trust in relation to the performance of the directors functions - Gihwala v Grancy property - 3 directors appropriated financial benefit or themselves. Court held that their conduct entailed gross abuse of position of director. Action was intentional. Therefore breach of trust Directors liability ito duty to exercise care, skill and diligence - ANSWER-- Fisheries development v Jorgensen 1980 - required degree of care and skill to a large degree depends on nature of business and specific duties assigned to director - non exec director not expected to give continuous attention to affairs of company - not expected of a director to have special expertise or experience - expected - exercise degree of care and skill once could reasonable expect from a person with his knowledge or experience - Remedies - based on contract or delict - Directors are not liable for mere errors of judgement - Directors may rely on officials and management unless there are reasons for questioning the judgement of such officials. A director must still give due regard and exercise his own judgement in doing so - S76 partially codified duty of care and skill. Directors must exercise duty of care and skill and diligence that may be reasonably expected of a person carrying out same functions in relation to company as those carried out by director - objective test - what would reasonable director have done. Contains subjective elements and therefore a dual test - S76(4) if director taken diligent steps to become informed about the matter, no personal financial interest, rational basis for believing decision in best interests of company - can be excused Discuss SH meeting? - ANSWER-S62(3) - a SH meeting should include date, time, place, record date, general purpose, specific purpose, copy of proposed resoultion, notice of percentage of voting rights S61(4) - failure to hold a SH meeting does not affect company existance or validity of any action taken by company - SH right to vote is a propriety right and a SH has a right to exercise his vote to his own interest - SH may not oppressively & fraudulently use their votes to defraud a minority - instances where compliance with formalities is not required - 1) unanimous assent at common law. 2) every SH is also a director Doctrine of constructive notice - ANSWER-- 3rd parties are deemed to be fully acquainted with contents of company's public docs, whether they have read them or not - partially abolished by S19(4) CA - 3rd parties are no longer deemed to have had notice or knowledge of contents of public docs of company merely because they have been filed with CIPC or are available for inspection at company office