MRL2601 PORTFOLIO MEMO - MAY/JUNE 2024 - SEMESTER 1 - UNISA - DUE DATE :- 27 MAY 2024 (DETAILED ANSWERS WITH FOOTNOTES AND BIBLIOGRAPHY - DISTINCTION GUARANTEED!)

MRL2601 PORTFOLIO MEMO - MAY/JUNE 2024 - SEMESTER 1 - UNISA - DUE DATE :- 27 MAY 2024 (DETAILED ANSWERS WITH FOOTNOTES AND BIBLIOGRAPHY - DISTINCTION GUARANTEED!) QUESTION 1 Fill in the missing word/s to complete the statement. In your answer provide only the question number and the answer. Example: 1.11 – Shareholder. 1.1 The process by which the court disregards the separate legal personality of a company or a close corporation in order to hold individuals liable is known as ……………………. (1) 1.2 The……………… is the sole registration document of a close corporation. (1) 1.3 Everest Ltd is a……………company. (1) 1.4 ……………. applies when an agent did not have actual authority to bind a company, and a misrepresentation was made by the company as principal that the agent had authority to act on behalf of the company. (1) 1.5 A document issued by a company acknowledging that it is indebted to the holder in the amount stated therein is called a…………… (1) 1.6 The number of persons needed to be present at a shareholders’ meeting for the meeting to begin is called a ………………… (1) 1.7 A(n) …………… is a director who holds office as a director of a company as a result of their holding another office or title or status. (1) 1.8 The optional agreement that can be concluded between members in a close corporation to regulate the internal affairs in the business, is called a(n) ………………. (1) 1.9 ………………… is a long-term project of constitutional enactment, interpretation and enforcement to transform the country’s political, legal and social institutions and power relations in a democratic way. (1) 1.10 A contract entered into by a person who is acting on behalf of a company that does not exist yet is called a …………………... (1) [10] CONFIDENTIAL Page 9 of 11 MRL2601 May/June 2024 QUESTION 2 2.1 The Memorandum of Incorporation of Guns 'n Roses (Pty) Ltd provides that the main business of the company is the manufacturing and sale of toy guns. Mr Hoodlum, one of the directors, has been authorised by a board resolution to act on behalf of the company. Mr Hoodlum concludes a contract on behalf of Guns ‘n Roses (Pty) Ltd with Mr Brothel for the purchase of a nightclub. Mr Brothel has no knowledge of the contents of the Memorandum of Incorporation of the company. Mr Orthodox, a majority shareholder of Guns ‘n Roses (Pty) Ltd, is upset about the purchase of the nightclub. Mr Orthodox approaches you for legal advice. 2.1.1 Explain whether the contract concluded by Mr Hoodlum and Mr Brothel is valid and enforceable against the company. (5) 2.1.2 Discuss the remedies available to Mr Orthodox as a shareholder of Guns ‘n Roses (Pty) Ltd if the contract was already concluded. (5) 2.2 The Companies Act 71 of 2008 introduced the solvency and liquidity test which directors of companies must apply prior to embarking on certain actions or transactions. 2.2.1 Explain the requirements of the solvency and liquidity test in the Companies Act 71 of 2008. (5) 2.2.2 List the actions or transactions to which the solvency and liquidity test must be applied. (5) [20] QUESTION 3 3.1 The directors of Koma Business Solutions (Pty) Ltd discover that Mpho, one of their co-directors, has been redirecting company funds from the accounts of Koma Business Solutions (Pty) Ltd to his personal account. They also discover that these illicit transactions have been taking place undetected for a period of five years. Consider whether the board will have grounds to successfully obtain a delinquency order against Mpho in terms of the Companies Act 71 of 2008. (7) CONFIDENTIAL Page 10 of 11 MRL2601 May/June 2024 3.2 Nomsa and Jackie have recently bought shares in Neo Enterprises (Pty) Ltd. Their shares entitle them each to 20% and 35% of voting rights in the issued shares, respectively. The board of directors proposes a merger with Helix (Pty) Ltd. Nomsa and Jackie are informed that a resolution of shareholders adopted at a properly constituted meeting is required to effect a merger. Since Nomsa and Jackie are not familiar with company law, they approach you for advice on the following: 3.2.1 Discuss the difference between an ordinary and special resolution in terms of the Companies Act 71 of 2008 and state the requirements of the respective resolutions. (4) 3.2.2 Briefly set out the requirements for a notice to convene a shareholders’ meeting. (8) 3.3 Mothibi is a director of a newly registered company. He has heard of Corporate Social Responsibility (CSR). However, he is not certain what the concept means and whether there are any benefits associated with implementing CSR in a company. Advise Mothibi. (6) [25] QUESTION 4 4.1 The main object of Gangnam’s Tile (Pty) Ltd is manufacturing tiles and tile adhesive. The Memorandum of Incorporation provides that the board of directors may enter into contracts on behalf of the company. Should the contract, however, exceed the amount of R250 000, the prior consent of the shareholders in a shareholders’ meeting is required. The board of directors buys a beach house for R3.5 million from Phineas on behalf of Gangnam’s Tile (Pty) Ltd. The consent of the shareholders in a shareholders’ meeting was never obtained. Explain to Phineas, in terms of any provision/s in the Companies Act 71 of 2008, whether he can hold the company liable in terms of the contract. (5) 4.2 Beauty, who was previously appointed as an office administrator at a law firm, is interested in becoming the company secretary of Gangnam’s Tile (Pty) Ltd. She is unsure what the position entails. Advise Beauty of five (5) duties of a company secretary. (5) [10] CONFIDENTIAL Page 11 of 11 MRL2601 May/June 2024 QUESTION 5 5.1 Saraphina is a member of Mend & Sew CC. The other members, Alphi and Botsego, feel that Saraphina has not been complying with her management duties in the close corporation, and they do not see their way forward with her continuing as a member. Advise them regarding the grounds upon which the court may, in terms of the Close Corporations Act 69 of 1984, order that a member shall cease to be a member of a close corporation. (5) 5.2 Lesedi and Carol are the members of Private Investigators CC. Upon formation of the close corporation, they agree that their respective membership contributions will consist of cash only. Each member was required to contribute R200 000, and these amounts were duly recorded in the founding statement. Apart from the monetary contribution, Lesedi also entered into a lease agreement in terms of which he rents out a building he privately owns to the close corporation for use as an office. Carol, a part-time student at UNISA, also enters into an employment contract with the close corporation. In terms of the contract of service she is required to be in the office to attend to the corporation’s day-to-day business. At a meeting of the members, Lesedi and Carol decide that due to a lack of profits generated from sales, the corporation will repay each member 10% of their respective contributions for their personal needs. They further agree that the corporation will make some payments to them in respect of their respective rental and employment agreements. Advise the members of Private Investigators CC whether these payments meet the requirements in terms of the Close Corporations Act 69 of 1984. (5) 5.3 Johan, Aubrey and Barbara are the members of ProperT CC. The main business of the close corporation is buying and selling of immovable property. The close corporation wishes to buy a certain property for development and resale. Barbara, being fully aware of the fact that the close corporation wishes to purchase the property, buys it in her personal capacity for R2 million. She then sells it to the close corporation for R3 million. What duty could Barbara have breached under the circumstances and what does this duty entail? (Indicate to whom the duty is owed and the scope of this duty). (5) [15]