LML4806
EXAM PACK
,COMPANY LAW - LML4806
SEMESTER 1 ASSIGNMENT 1 2026
EXAM ANSWERS
QUESTION 1
Introduction
The issue is whether Multicuisine Ltd has provided financial assistance to Multicuisine
Ramatla (RF) Ltd for the purpose of acquiring shares in Multicuisine Ltd. The answer
depends primarily on the provisions regulating financial assistance in the Companies
Act 71 of 2008.
1. Type of company
Multicuisine Ramatla (RF) Ltd is a private company. The abbreviation “(RF)” indicates
that it is a ring-fenced company. Section 8(2)(b) of the Companies Act recognises a
private company that is subject to restrictions relating to the transferability of its
securities and that prohibits an offer of its securities to the public.
The fact that Multicuisine Ramatla (RF) Ltd has just been incorporated does not prevent
it from acquiring shares in another company. It is a separate juristic person from
Multicuisine Ltd and can therefore enter into contracts, incur debts and acquire
securities in its own name.
2. Financial assistance for the acquisition of securities
Section 44 of the Companies Act 71 of 2008 deals specifically with financial
assistance for the subscription or purchase of securities.
In terms of section 44(1), a company may provide financial assistance, directly or
indirectly, to a person for the purpose of, or in connection with, the subscription for or
,purchase of securities of that company, provided that the requirements imposed by the
Act are satisfied.
In this case, Multicuisine Ltd advanced a loan of R85 million to Multicuisine Ramatla
(RF) Ltd. The recipient then used the money to purchase 850 000 ordinary shares in
Multicuisine Ltd. There is therefore a direct connection between the loan provided by
Multicuisine Ltd and the acquisition of its own shares by Multicuisine Ramatla (RF) Ltd.
The transaction consequently falls within the scope of section 44 because Multicuisine
Ltd has provided financial assistance to enable another person to acquire securities in
Multicuisine Ltd.
However, the provision of financial assistance is not automatically unlawful. Section 44
permits such assistance if the statutory requirements are met. In particular, the
company's memorandum of incorporation (MOI) must permit the assistance, or at
least not prohibit it, and the board must be satisfied that the company will satisfy the
applicable solvency and liquidity test immediately after providing the assistance.
The board must also comply with the statutory procedural requirements applicable to
the assistance, including the requirement relating to shareholder approval where
applicable. The transaction must furthermore be entered into on terms that are fair and
reasonable to the company.
3. Application to the facts
Multicuisine Ltd's loan is clearly connected to the purchase of its own shares because:
1. Multicuisine Ltd advanced R85 million to Multicuisine Ramatla (RF) Ltd.
2. The loan was specifically used to acquire 850 000 ordinary shares in Multicuisine
Ltd.
3. The loan will be repaid from dividends generated by those shares.
4. The arrangement was designed to facilitate the acquisition of an interest in
Multicuisine Ltd.
, The fact that the loan is repayable over ten years does not remove the transaction from
section 44. The important consideration is the purpose and connection between the
financial assistance and the acquisition of the company's securities.
The use of dividends to repay the loan is also relevant because the repayment
mechanism depends on distributions made by Multicuisine Ltd to the shareholder. This
reinforces the economic connection between the assistance and the acquisition of the
shares.
The transaction would therefore constitute financial assistance for the purchase of
securities as contemplated by section 44 of the Companies Act.
It should be emphasised that the transaction is not necessarily invalid merely because it
constitutes financial assistance. It will be lawful only if Multicuisine Ltd complies with all
the requirements of section 44, including the applicable requirements concerning its
MOI, the board's approval and the solvency and liquidity test.
Conclusion
Multicuisine Ramatla (RF) Ltd is a private ring-fenced company. Multicuisine Ltd has
provided financial assistance because it advanced R85 million to enable Multicuisine
Ramatla (RF) Ltd to purchase shares in Multicuisine Ltd itself.
The transaction therefore falls within section 44 of the Companies Act 71 of 2008.
The assistance will be permissible only if all the statutory requirements have been
satisfied. The fact that the loan is to be repaid from dividends does not change the
nature of the transaction.
QUESTION 2
The issue is whether Davy and Ariana are legally eligible to be appointed as directors of
RIM Plastics Ltd in light of their previous conduct and convictions.
EXAM PACK
,COMPANY LAW - LML4806
SEMESTER 1 ASSIGNMENT 1 2026
EXAM ANSWERS
QUESTION 1
Introduction
The issue is whether Multicuisine Ltd has provided financial assistance to Multicuisine
Ramatla (RF) Ltd for the purpose of acquiring shares in Multicuisine Ltd. The answer
depends primarily on the provisions regulating financial assistance in the Companies
Act 71 of 2008.
1. Type of company
Multicuisine Ramatla (RF) Ltd is a private company. The abbreviation “(RF)” indicates
that it is a ring-fenced company. Section 8(2)(b) of the Companies Act recognises a
private company that is subject to restrictions relating to the transferability of its
securities and that prohibits an offer of its securities to the public.
The fact that Multicuisine Ramatla (RF) Ltd has just been incorporated does not prevent
it from acquiring shares in another company. It is a separate juristic person from
Multicuisine Ltd and can therefore enter into contracts, incur debts and acquire
securities in its own name.
2. Financial assistance for the acquisition of securities
Section 44 of the Companies Act 71 of 2008 deals specifically with financial
assistance for the subscription or purchase of securities.
In terms of section 44(1), a company may provide financial assistance, directly or
indirectly, to a person for the purpose of, or in connection with, the subscription for or
,purchase of securities of that company, provided that the requirements imposed by the
Act are satisfied.
In this case, Multicuisine Ltd advanced a loan of R85 million to Multicuisine Ramatla
(RF) Ltd. The recipient then used the money to purchase 850 000 ordinary shares in
Multicuisine Ltd. There is therefore a direct connection between the loan provided by
Multicuisine Ltd and the acquisition of its own shares by Multicuisine Ramatla (RF) Ltd.
The transaction consequently falls within the scope of section 44 because Multicuisine
Ltd has provided financial assistance to enable another person to acquire securities in
Multicuisine Ltd.
However, the provision of financial assistance is not automatically unlawful. Section 44
permits such assistance if the statutory requirements are met. In particular, the
company's memorandum of incorporation (MOI) must permit the assistance, or at
least not prohibit it, and the board must be satisfied that the company will satisfy the
applicable solvency and liquidity test immediately after providing the assistance.
The board must also comply with the statutory procedural requirements applicable to
the assistance, including the requirement relating to shareholder approval where
applicable. The transaction must furthermore be entered into on terms that are fair and
reasonable to the company.
3. Application to the facts
Multicuisine Ltd's loan is clearly connected to the purchase of its own shares because:
1. Multicuisine Ltd advanced R85 million to Multicuisine Ramatla (RF) Ltd.
2. The loan was specifically used to acquire 850 000 ordinary shares in Multicuisine
Ltd.
3. The loan will be repaid from dividends generated by those shares.
4. The arrangement was designed to facilitate the acquisition of an interest in
Multicuisine Ltd.
, The fact that the loan is repayable over ten years does not remove the transaction from
section 44. The important consideration is the purpose and connection between the
financial assistance and the acquisition of the company's securities.
The use of dividends to repay the loan is also relevant because the repayment
mechanism depends on distributions made by Multicuisine Ltd to the shareholder. This
reinforces the economic connection between the assistance and the acquisition of the
shares.
The transaction would therefore constitute financial assistance for the purchase of
securities as contemplated by section 44 of the Companies Act.
It should be emphasised that the transaction is not necessarily invalid merely because it
constitutes financial assistance. It will be lawful only if Multicuisine Ltd complies with all
the requirements of section 44, including the applicable requirements concerning its
MOI, the board's approval and the solvency and liquidity test.
Conclusion
Multicuisine Ramatla (RF) Ltd is a private ring-fenced company. Multicuisine Ltd has
provided financial assistance because it advanced R85 million to enable Multicuisine
Ramatla (RF) Ltd to purchase shares in Multicuisine Ltd itself.
The transaction therefore falls within section 44 of the Companies Act 71 of 2008.
The assistance will be permissible only if all the statutory requirements have been
satisfied. The fact that the loan is to be repaid from dividends does not change the
nature of the transaction.
QUESTION 2
The issue is whether Davy and Ariana are legally eligible to be appointed as directors of
RIM Plastics Ltd in light of their previous conduct and convictions.
