LML4806 Assignment 2 (COMPLETE ANSWERS) Semester 2 2025 - DUE September 2025

The board of directors of Zentech Solutions Ltd received two takeover bids, one from a majority shareholder of the company, Imali Ltd, and the other from Ndugu Holdings Ltd. The board of Zentech Solutions Ltd believes in good faith that the takeover bid from Ndugu Holdings Ltd, which is slightly higher, is in the company’s best interests. It issues further shares of the company to Ndugu Holdings Ltd in order to dilute the majority shareholding of Imali Ltd and to ensure that the takeover bid made by Ndugu Holdings Ltd would be successful. Imali Ltd wishes to challenge the issue of the additional shares to Ndugu Holdings Ltd by the board of Zentech Solutions Ltd on the basis that the board breached its fiduciary duty to act for a proper purpose in issuing these shares. The board of Zentech Solutions Ltd is of the view that it was acting in the company’s best interests in issuing the additional shares, especially since none of the directors obtained any personal advantage for themselves. With reference to the Companies Act 71 of 2008 and relevant case law, advise Imali Ltd of its prospects of success in having the issue of the shares to Ndugu Holdings Ltd set aside by a court on the basis that the directors of Imali Ltd breached their fiduciary duty to act for a proper purpose. Springbok Finance (Pty) Ltd is one of the creditors of Falcon Airlines Ltd. The board of directors of Falcon Airlines Ltd passed a resolution placing Falcon Airlines Ltd in voluntary business rescue and appointed Ntando as the business rescue practitioner. Springbok Finance (Pty) Ltd believes that Falcon Airlines Ltd can be successfully rescued. However, Springbok Finance (Pty) Ltd is dissatisfied with the way Ntando is performing his duties as the business rescue practitioner as he has failed to implement the approved business rescue plan. Ntando has also not been preparing and submitting the required monthly reports even though the business rescue proceedings have lasted longer than three months. Springbok Finance (Pty) Ltd wants to appoint Andile, an experienced business rescue practitioner in the airline industry, to replace Ntando as the business rescue practitioner of Falcon Airlines Ltd. Explain whether there are grounds to remove Ntando as the business rescue practitioner, and if so whether Springbok Finance (Pty) Ltd may appoint Andile to replace Ntando as the business rescue practitioner of Falcon Airlines Ltd. (5) Boaz is a business rescue practitioner of a company that is under business rescue. Due to complications in the company, Boaz applied to court to extend the duration of the business rescue proceedings for two additional months. The additional two months have lapsed and the business rescue proceedings have not ended. Boaz wants the business rescue proceedings to continue as the company is slowly recovering from its financial distress. With reference to the relevant provisions of the Companies Act 71 of 2008, advise Boaz on what he should do under these circumstances. Gillian and Eric are close friends. Gillian is a non-executive director of Waverly Ltd, a listed company. Eric is the sole director of Ericsson Capital (Pty) Ltd, a company that holds 250 000 shares in Waverly Ltd. Gillian tells Eric that Waverly Ltd and its executive directors are being investigated by regulatory authorities for accounting and tax fraud relating to the company’s annual financial statements for the past two financial years. Eric immediately instructs his stockbroker to sell all the shares held by Ericsson Capital (Pty) Ltd in Waverly Ltd. The stockbroker sells the shares at a price of R100 per share. Eric also advises his brother, Raymond, to sell at least half of the shares that he holds in Waverly Ltd but does not tell him the reason why he should do so. Raymond does not sell his shares. The following week, the board of directors of Waverly Ltd issues an announcement that the company’s annual financial statements for the past two financial years will be restated and that the company’s accounting and tax affairs are being investigated by regulatory authorities. The share price of Waverly Ltd falls by 60% to R40 per share. Explain whether Gillian, Eric and the stockbroker have committed any criminal offence(s) in terms of the Financial Markets Act 19 of 2012. (You should deal with each person separately and you should not include a discussion of any defences to the relevant offences in your answer). Skylab (Pty) Ltd wishes to have a database designed and installed that will receive, process and store information generated by the work done in its laboratory. It wants to appoint a service provider to design and install this system, and also wants the service provider to maintain the database for the next ten years. Internet World (Pty) Ltd is keen to conclude this contract with Skylab (Pty) Ltd as it is a very profitable contract. It appoints Lerato, one of its directors, to enter into negotiations with Skylab (Pty) Ltd for this purpose. After a few weeks of negotiations, Skylab (Pty) Ltd decides that it does not want to conclude the contract with Internet (Pty) Ltd but wishes to enter into the contract with Lerato in her personal capacity. It offers the contract to Lerato personally. Lerato subsequently resigns as a director of Internet World (Pty) Ltd and informs the Skylab (Pty) Ltd wishes to have a database designed and installed that will receive, process and store information generated by the work done in its laboratory. It wants to appoint a service provider to design and install this system, and also wants the service provider to maintain the database for the next ten years. Internet World (Pty) Ltd is keen to conclude this contract with Skylab (Pty) Ltd as it is a very profitable contract. It appoints Lerato, one of its directors, to enter into negotiations with Skylab (Pty) Ltd for this purpose. After a few weeks of negotiations, Skylab (Pty) Ltd decides that it does not want to conclude the contract with Internet (Pty) Ltd but wishes to enter into the contract with Lerato in her personal capacity. It offers the contract to Lerato personally. Lerato subsequently resigns as a director of Internet World (Pty) Ltd and informs the 4 company that she wishes to take early retirement and travel the world before she gets too old. Internet World (Pty) Ltd appoints Themba to continue the negotiations with Skylab (Pty) Ltd in place of Lerato. When Themba tries to arrange a meeting with Skylab (Pty) Ltd for this purpose, he is informed by Skylab (Pty) Ltd that it had already concluded a contract with Lerato in her personal capacity for the design and installation of the database, and that Lerato had recently commenced working on the database. Internet World (Pty) Ltd wishes to pursue legal action against Lerato for a breach of her fiduciary duties. Lerato argues that she signed the contract with Skylab (Pty) Ltd only after she had resigned from Internet World (Pty) Ltd and that she had therefore not breached her fiduciary duties to Internet World (Pty) Ltd. With reference to the Companies Act 71 of 2008, relevant case law and the facts provided, discuss whether Lerato has breached any specific fiduciary duties she owed to Internet World (Pty) Ltd. Also consider the validity of Lerato’s argument that she did not breach her fiduciary duties to Internet World (Pty) Ltd since she signed the contract with Skylab (Pty) Ltd only after she had resigned from Internet World (Pty) Ltd. company that she wishes to take early retirement and travel the world before she gets too old. Internet World (Pty) Ltd appoints Themba to continue the negotiations with Skylab (Pty) Ltd in place of Lerato. When Themba tries to arrange a meeting with Skylab (Pty) Ltd for this purpose, he is informed by Skylab (Pty) Ltd that it had already concluded a contract with Lerato in her personal capacity for the design and installation of the database, and that Lerato had recently commenced working on the database. Internet World (Pty) Ltd wishes to pursue legal action against Lerato for a breach of her fiduciary duties. Lerato argues that she signed the contract with Skylab (Pty) Ltd only after she had resigned from Internet World (Pty) Ltd and that she had therefore not breached her fiduciary duties to Internet World (Pty) Ltd. With reference to the Companies Act 71 of 2008, relevant case law and the facts provided, discuss whether Lerato has breached any specific fiduciary duties she owed to Internet World (Pty) Ltd. Also consider the validity of Lerato’s argument that she did not breach her fiduciary duties to Internet World (Pty) Ltd since she signed the contract with Skylab (Pty) Ltd only after she had resigned from Internet World (Pty) Ltd.Gillian and Eric are close friends. Gillian is a non-executive director of Waverly Ltd, a listed company. Eric is the sole director of Ericsson Capital (Pty) Ltd, a company that holds 250 000 shares in Waverly Ltd. Gillian tells Eric that Waverly Ltd and its executive directors are being investigated by regulatory authorities for accounting and tax fraud relating to the company’s annual financial statements for the past two financial years. Eric immediately instructs his stockbroker to sell all the shares held by Ericsson Capital (Pty) Ltd in Waverly Ltd. The stockbroker sells the shares at a price of R100 per share. Eric also advises his brother, Raymond, to sell at least half of the shares that he holds in Waverly Ltd but does not tell him the reason why he should do so. Raymond does not sell his shares. The following week, the board of directors of Waverly Ltd issues an announcement that the company’s annual financial statements for the past two financial years will be restated and that the company’s accounting and tax affairs are being investigated by regulatory authorities. The share price of Waverly Ltd falls by 60% to R40 per share. Explain whether Gillian, Eric and the stockbroker have committed any criminal offence(s) in terms of the Financial Markets Act 19 of 2012. (You should deal with each person separately and you should not include a discussion of any defences to the relevant offences in your answer). Springbok Finance (Pty) Ltd is one of the creditors of Falcon Airlines Ltd. The board of directors of Falcon Airlines Ltd passed a resolution placing Falcon Airlines Ltd in voluntary business rescue and appointed Ntando as the business rescue practitioner. Springbok Finance (Pty) Ltd believes that Falcon Airlines Ltd can be successfully rescued. However, Springbok Finance (Pty) Ltd is dissatisfied with the way Ntando is performing his duties as the business rescue practitioner as he has failed to implement the approved business rescue plan. Ntando has also not been preparing and submitting the required monthly reports even though the business rescue proceedings have lasted longer than three months. Springbok Finance (Pty) Ltd wants to appoint Andile, an experienced business rescue practitioner in the airline industry, to replace Ntando as the business rescue practitioner of Falcon Airlines Ltd. Explain whether there are grounds to remove Ntando as the business rescue practitioner, and if so whether Springbok Finance (Pty) Ltd may appoint Andile to replace Ntando as the business rescue practitioner of Falcon Airlines Ltd. (5) Boaz is a business rescue practitioner of a company that is under business rescue. Due to complications in the company, Boaz applied to court to extend the duration of the business rescue proceedings for two additional months. The additional two months have lapsed and the business rescue proceedings have not ended. Boaz wants the business rescue proceedings to continue as the company is slowly recovering from its financial distress. With reference to the relevant provisions of the Companies Act 71 of 2008, advise Boaz on what he should do under these circumstances. SA Renewables Ltd holds 40% of the ordinary shares in Green Energy Ltd and 100% of the ordinary shares in New Technologies Ltd. New Technologies Ltd holds 25% of the ordinary shares in Green Energy Ltd. Green Energy Ltd wants to issue shares to raise cash. An investment company called Investment Solutions (Pty) Ltd wants to purchase the shares to be issued by Green Energy Ltd. However, Investment Solutions (Pty) Ltd does not have the money for the shares and requires a loan to purchase the shares. Therefore, the directors of SA Renewables Ltd, Green Energy Ltd and Investment Solutions (Pty) Ltd are negotiating a transaction in terms of which: • Investment Solutions (Pty) Ltd will purchase 10% of the shares to be issued by Green Energy Ltd; • The consideration for the shares will be paid for by a loan of R250 million that will be obtained by Investment Solutions (Pty) Ltd from Capital Bank Ltd; • SA Renewables Ltd will assure Capital Bank Ltd that Investment Solutions (Pty) Ltd will repay the loan; and • SA Renewables Ltd will give an undertaking to Capital Bank Ltd that, should Investment Solutions (Pty) Ltd fail to repay the loan, SA Renewables Ltd will step into Investment Solutions (Pty) Ltd’s shoes and repay the loan to Capital Bank Ltd directly. Explain whether SA Renewables Ltd and Green Energy Ltd are related companies. (5) Discuss the formalities and procedures that must be complied with before the board of directors may authorise the conclusion of an agreement in terms of which SA Renewables Ltd will assume the obligation to repay the loan in question to Capital Bank Ltd in the event that Investment Solutions (Pty) Ltd fails to do so. Also explain what the You are approached by Stefan, the chairperson of the board of directors of JP Textiles Ltd for legal advice. He informs you that JP Textiles Ltd will be holding its fifth annual general meeting (AGM) next month at its registered office in Johannesburg. He further informs you that the board of directors is concerned that a significant number of the company’s shareholders and shareholder proxies who are based outside Johannesburg and overseas will not be able to travel to Johannesburg to attend the AGM in-person (physically) at the company’s registered office. Advise Stefan on what the company could do to ensure that it provides a reasonable opportunity for all the shareholders and shareholder proxies to attend and participate at its fifth AGM.