MRL2601
ASSESSMENT 2
SEMESTER 2 - 2022
, QUESTION 1
Roger was appointed as managing director of Donavan Constructions Ltd. In
May 2002 the company landed a large contract for the renovation and
improvement of the N3 highway to Durban. They invited tenders from
subcontractors for the supply of building material. Roger and his brother, John,
incorporated a close corporation called Best Bet CC. They submitted a tender
for the supply of the building material. Roger did not mention his involvement
with Best Bet CC. At the board meeting he only said: “I have it on good authority
that this (Best Bet CC) is an excellent business with good management”. The
board trusted Roger and awarded the contract to Best Bet CC.
The board of directors wants to know whether there is any basis to ground an
action/ remedy against Roger on behalf of the company. Advise the board. (Your
answer should not exceed ¾ of a page) (5)
In this case, it is indicative that there was a conflict between the directors’ interests
and the interests of the company. When this is the case, it is indicative of a potential
breach of fiduciary duties. A director should not abuse his or her position as director
or misuse any information obtained as director. He or she must prevent a conflict
arising between his or her own interests and those of the company. This means that
a director may not for personal gain make use of any information he or she has
acquired in his or her capacity as a director.
Firstly, section 75 of the Companies Act prescribes how a director should act when his
or her personal financial interests conflict with those of the company. Two different
situations are regulated in this provision. If a director is the only director, but not the
only shareholder of the company, he or she must disclose any personal interest in an
agreement or other matter of the company to the shareholders and obtain their prior
approval by an ordinary resolution before he or she enters into this agreement or deals
with the matter. In all other cases, disclosure must be made to the board of directors
of any personal financial interest of the director in a matter to be considered at a board
meeting, and such director may not be present or take part in the discussion. A director
may also make an advance general disclosure of his or her personal financial interests
to the shareholders or board, as the case may be.
ASSESSMENT 2
SEMESTER 2 - 2022
, QUESTION 1
Roger was appointed as managing director of Donavan Constructions Ltd. In
May 2002 the company landed a large contract for the renovation and
improvement of the N3 highway to Durban. They invited tenders from
subcontractors for the supply of building material. Roger and his brother, John,
incorporated a close corporation called Best Bet CC. They submitted a tender
for the supply of the building material. Roger did not mention his involvement
with Best Bet CC. At the board meeting he only said: “I have it on good authority
that this (Best Bet CC) is an excellent business with good management”. The
board trusted Roger and awarded the contract to Best Bet CC.
The board of directors wants to know whether there is any basis to ground an
action/ remedy against Roger on behalf of the company. Advise the board. (Your
answer should not exceed ¾ of a page) (5)
In this case, it is indicative that there was a conflict between the directors’ interests
and the interests of the company. When this is the case, it is indicative of a potential
breach of fiduciary duties. A director should not abuse his or her position as director
or misuse any information obtained as director. He or she must prevent a conflict
arising between his or her own interests and those of the company. This means that
a director may not for personal gain make use of any information he or she has
acquired in his or her capacity as a director.
Firstly, section 75 of the Companies Act prescribes how a director should act when his
or her personal financial interests conflict with those of the company. Two different
situations are regulated in this provision. If a director is the only director, but not the
only shareholder of the company, he or she must disclose any personal interest in an
agreement or other matter of the company to the shareholders and obtain their prior
approval by an ordinary resolution before he or she enters into this agreement or deals
with the matter. In all other cases, disclosure must be made to the board of directors
of any personal financial interest of the director in a matter to be considered at a board
meeting, and such director may not be present or take part in the discussion. A director
may also make an advance general disclosure of his or her personal financial interests
to the shareholders or board, as the case may be.
