MCL5903 PORTFOLIO 2024 (DETAILED ANSWERS) - DUE 19 January 2024

MCL5903 PORTFOLIO 2024 (DETAILED ANSWERS) - DUE 19 January 2024 100% TRUSTED workings, explanations and solutions. For assistance call or W.h.a.t.s.a.p.p us on +/ 2/ 5/ 4 /7 /7 /9 /5 /4 /0 /1 /3 /2 . Question 1 (20 marks) Best Bank Ltd institutes an application for winding-up of Getaway Trucking (Pty) Ltd (‘Getaway’). The winding-up application is based upon a ‘without prejudice’ letter of reply from Getaway to a letter of demand by Best Bank Ltd. In terms of the letter of demand, Best Bank Ltd is seeking payment of arrears under the loan agreement. The letter of reply from Getaway specifically states that ‘the company will tender payment only if there were surplus funds available for repayment of arrears.’ Getaway denies that it is commercially insolvent. Getaway further says that in terms of the loan agreement entered with Best Bank Ltd, part of the debt giving rise to the winding-up application was extinguished by prescription. Lastly, Getaway argues that the remainder of the debt was not yet due and payable as it had been subordinated to the debts of other creditors of the company by agreement between the parties. Therefore, according to Getaway, it was not indebted to Best Bank Ltd. You are appointed the legal adviser of Best Bank Ltd, and must provide advice on the legal position of Best Bank Ltd regarding the following matters: a. The laws specifically applicable should Getaway be wound up and the reasons for the application of such laws. (5) b. Whether Best Bank Ltd has the locus standi to institute winding-up proceedings against Getaway based on a subordinated claim. (5) c. Whether a subordination of Best Bank Ltd.’s debt to the debts of other creditors of Getaway could render it (the debt) undue and not payable during winding-up proceedings. (5) d. Whether Best Bank Ltd is entitled to institute winding-up proceedings on the basis of the contents of Getaway’s ‘without prejudice’ letter. Further comment on the admissibility of statements made ‘without prejudice’ during bona fide negotiations between the parties. (5) 5 Question 2 [10 marks] The board of directors of Aloe Well (Pty) Ltd (the company) is experiencing difficulties in operating the company effectively due to frequent disagreements between the board of directors and the shareholders. The company is unable to adopt resolutions on important company matters and thus constantly losing money. The board adopts a resolution to wind up the company. However, the board consults you for advice on possible liability if, during the process, the court finds the board to be equally liable for the perilous situation of the company. Advise the board on the extent to which the board's responsibility may affect the outcome of the winding up application. Question 3 [20 marks] Dino is an employee of Speedway CC (‘Speedway’). She brought an application to place the corporation under business rescue proceedings. The application is brought pursuant to section 131 of the Companies Act 71 of 2008 after the corporation was placed under final liquidation. The application is unsuccessful, and Dino has launched appeal proceedings contesting the ruling of the lower court. The main issue before the Appeal Court is the interpretation of the phrase “liquidation proceedings” within the context of section 131(6) of the Companies Act 71 of 2008. One of the questions to be considered by the SCA is whether the phrase “liquidation proceedings” refers only to a pending liquidation application or it includes the process of winding up of a company after being placed under final liquidation. With reference to the relevant journal article and case law discussed therein, critically discuss some of the challenges brought about by the courts’ interpretation of section 131(6) of the Companies Act 71 of 2008. Question 4 [10 marks] Aviation Global Logistics SOC Ltd (‘Aviation Global’) is a state-owned company and a national air carrier incorporated in terms of the relevant provisions of the Companies Act 71 of 2008. Due to failures in corporate governance, which were revealed in the Auditor-General’s report of 2022, Aviation Global is experiencing financial challenges. This has caused Aviation Global to be unable to pay its debts 6 when they are due and payable. One-Stop (Pty) Ltd (‘One-Stop’) is one of Aviation Global’s many creditors. After the board of One-Stop learnt of Aviation Global’s problems, it resolved to institute an application to place Aviation Global under business rescue in terms of section 131(1) of the Companies Act 71 of 2008. Aviation Global opposes this application on the basis that One-Stop failed to demonstrate that it is in financial distress and further that there is a reasonable prospect of Aviation Global being rescued. With reference to the relevant provisions of the Companies Act 71 of 2008 as well as case law, critically discuss the phrase ‘reasonable prospect’ as a requirement that must be fulfilled before an application in terms of section 131(1) can succeed. Question 5 [20 marks] Aloe-Well (Pty) Ltd (‘Aloe-Well’), is a company that distributes Aloe Vera sports supplements. Aloe-Well has been a successful company, fetching profits and declaring dividends in accordance with the terms stipulated in the company’s Memorandum of Incorporation. In the beginning of December 2021, the directors of Aloe-Well issued a media statement, stating that the share price of the company had collapsed. According to the media statement, the collapse of the share price is due to accounting irregularities. Furthermore, it was discovered during forensic investigations that the financial statements of Aloe-Well were ‘false, falsified, misleading, incomplete, and failed to reflect an accurate picture of the company’s financial state’. The shareholders of Aloe-Well, most of whom lost a significant portion of their investment in Aloe-Well, approach you to initiate proceedings in terms of section 218(2) of the Companies Act 71 of 2008. The purpose of the proceedings is to launch a claim against the directors of Aloe-Well, for pure economic loss as a result of a reduction in the value of shares of the company. As the legal counsel for the shareholders of Aloe-Well, you are required to provide legal advice, based on the principles established in Itzikowitz v Absa Bank Ltd (20729/2014) [2016] ZASCA 43 (31 March 2016), related cases and other relevant authorities on the following aspects: 7 a) Whether a shareholder’s claim based on a reduction in the value of shares, is a correct cause of action for the shareholders to pursue, given the applicable company law principles. (10) b) Discuss the interpretational challenges that beset the application of section 218(2) of the Companies Act 71 of 2008 for delictual claims based on pure economic loss. (10) Question 6 [20 marks] Lethabong (Pty) Ltd (‘Lethabong’) is a consulting company providing advisory services to the local municipalities. Due to internal politically charged disputes within these municipalities, clients’ accounts are not paid, thus rendering companies such as Lethabong insolvent. However, the directors of Lethabong have failed to submit annual returns with the Companies and Intellectual Property Commission (‘CIPC’) for a period of 3 years. According to Thabo, one of the directors of Lethabong, failure by the company to file its returns is attributed to lack of knowledge on the procedure to be followed when the company is in a state of illiquidity. With reference to the relevant provisions of the Companies Act 71 of 2008, describe the circumstances upon which the company could be deregistered and the effect of deregistration on Thabo’s liability for breach of fiduciary duties. In your answer, you should also address a distinction between dissolution and deregistration of companies.