,
,
, 1.2.2 Advise Lindiwe whether she has any remedies in the event that she objects to the
purchase of the ski-boats from Aqua Equipment Ltd. (5)
1.2.3 Explain whether Vusi can prevent the purchase of the ski-boats from Aqua Equipment
Ltd. (2)
QUESTION 2 [25]
Tebogo, Mbali and Dominique are the directors of Jenkins Investments Ltd (‘the Company’). The
Company’s business is to subscribe for shares and invest in property development companies. Tebogo
is an admitted attorney. Mbali and Dominique are chartered accountants and have considerable
experience as directors of various property companies. Pursuant to resolutions supported by all the
directors at a board meeting, the Company enters into the following transactions:
• The Company borrows R50 million from the bank and uses the money to acquire a 10%
shareholding in Abby Realtors Ltd, a company that is controlled by Tebogo’s wife, Abigail.
Although Tebogo convinces Mbali and Dominique that there will be a 100% return on the
investment within 24 months, all the directors are aware that Abby Realtors Ltd has for a long
time been experiencing financial difficulties and that its business is on the verge of collapsing.
After eight months, Abby Realtors Ltd is liquidated and the Company loses its entire investment
of R50 million. In the meantime, the Company has not yet repaid the loan taken from the bank
and interest on the loan has increased.
• The Company pays its directors a salary of R5 million each, which is considerably above what
comparable companies are paying their directors.
• The Company makes unsecured loans totaling R8 million to Mbali and Dominique interest-free.
Mbali and Dominique use the money to subscribe for shares in the Company. The Company
does not have any employee share scheme. The loans are made without the knowledge or
approval of the shareholders. Mbali and Dominique do not repay the loans, resulting in the
company losing at least R8 million.
When they become aware of the above transactions, the shareholders of Jenkins Investments Ltd are
dissatisfied with the way the directors are managing the affairs of the Company, which has resulted in
the Company suffering the above losses.
,
, 1.2.2 Advise Lindiwe whether she has any remedies in the event that she objects to the
purchase of the ski-boats from Aqua Equipment Ltd. (5)
1.2.3 Explain whether Vusi can prevent the purchase of the ski-boats from Aqua Equipment
Ltd. (2)
QUESTION 2 [25]
Tebogo, Mbali and Dominique are the directors of Jenkins Investments Ltd (‘the Company’). The
Company’s business is to subscribe for shares and invest in property development companies. Tebogo
is an admitted attorney. Mbali and Dominique are chartered accountants and have considerable
experience as directors of various property companies. Pursuant to resolutions supported by all the
directors at a board meeting, the Company enters into the following transactions:
• The Company borrows R50 million from the bank and uses the money to acquire a 10%
shareholding in Abby Realtors Ltd, a company that is controlled by Tebogo’s wife, Abigail.
Although Tebogo convinces Mbali and Dominique that there will be a 100% return on the
investment within 24 months, all the directors are aware that Abby Realtors Ltd has for a long
time been experiencing financial difficulties and that its business is on the verge of collapsing.
After eight months, Abby Realtors Ltd is liquidated and the Company loses its entire investment
of R50 million. In the meantime, the Company has not yet repaid the loan taken from the bank
and interest on the loan has increased.
• The Company pays its directors a salary of R5 million each, which is considerably above what
comparable companies are paying their directors.
• The Company makes unsecured loans totaling R8 million to Mbali and Dominique interest-free.
Mbali and Dominique use the money to subscribe for shares in the Company. The Company
does not have any employee share scheme. The loans are made without the knowledge or
approval of the shareholders. Mbali and Dominique do not repay the loans, resulting in the
company losing at least R8 million.
When they become aware of the above transactions, the shareholders of Jenkins Investments Ltd are
dissatisfied with the way the directors are managing the affairs of the Company, which has resulted in
the Company suffering the above losses.
