LML4806
Assignment 2 Semester 1 2025
Unique number:
Due Date: March 2025
This document includes:
Helpful answers and guidelines
Detailed explanations and/ or calculations
References
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+27 68 812 0934
,© Study Shack 2024. All rights Reserved +27 68 812 0934
, QUESTION 1
1.1. (2 ANSWERS PROVIDED)
Under section 71 of the Companies Act 71 of 2008, a director may be
removed by either the shareholders or the board of directors. In this case,
since Star Engineering (Pty) Ltd only has two directors, Mashudu must rely on
the provisions for board removal under section 71(3).
A director may be removed by the board if:
1. The director has become ineligible or disqualified.
2. The director has become incapacitated and is unable to perform the
functions of a director.
3. The director has neglected or been derelict in performing their duties.
Peter’s failure to ensure the timely preparation and submission of financial
statements and his omission to sign the annual financial statements could be
considered neglect of duty under section 71(3). This amounts to a dereliction
of duty, which is a valid basis for his removal.
However, because Star Engineering (Pty) Ltd has only two directors,
Mashudu may need to refer the matter to the Companies Tribunal if there is
a dispute, as per section 71(8). Additionally, if Peter was also employed under
a five-year executive contract, his removal as a director does not
automatically terminate his employment contract, and the company could be
liable for damages if the contract is breached.
OR
Mashudu has a valid basis to remove Peter as a director of Star Engineering
(Pty) Ltd based on the provisions of the Companies Act 71 of 2008. According
to section 71(3), a director may be removed by the board of directors if they
have neglected their functions or become disqualified or ineligible. Peter’s
failure to ensure the timely preparation and submission of annual financial
statements for the past two financial years, as well as his omission to sign the
© Study Shack 2024. All rights Reserved +27 68 812 0934
Assignment 2 Semester 1 2025
Unique number:
Due Date: March 2025
This document includes:
Helpful answers and guidelines
Detailed explanations and/ or calculations
References
Connect with the tutor on
+27 68 812 0934
,© Study Shack 2024. All rights Reserved +27 68 812 0934
, QUESTION 1
1.1. (2 ANSWERS PROVIDED)
Under section 71 of the Companies Act 71 of 2008, a director may be
removed by either the shareholders or the board of directors. In this case,
since Star Engineering (Pty) Ltd only has two directors, Mashudu must rely on
the provisions for board removal under section 71(3).
A director may be removed by the board if:
1. The director has become ineligible or disqualified.
2. The director has become incapacitated and is unable to perform the
functions of a director.
3. The director has neglected or been derelict in performing their duties.
Peter’s failure to ensure the timely preparation and submission of financial
statements and his omission to sign the annual financial statements could be
considered neglect of duty under section 71(3). This amounts to a dereliction
of duty, which is a valid basis for his removal.
However, because Star Engineering (Pty) Ltd has only two directors,
Mashudu may need to refer the matter to the Companies Tribunal if there is
a dispute, as per section 71(8). Additionally, if Peter was also employed under
a five-year executive contract, his removal as a director does not
automatically terminate his employment contract, and the company could be
liable for damages if the contract is breached.
OR
Mashudu has a valid basis to remove Peter as a director of Star Engineering
(Pty) Ltd based on the provisions of the Companies Act 71 of 2008. According
to section 71(3), a director may be removed by the board of directors if they
have neglected their functions or become disqualified or ineligible. Peter’s
failure to ensure the timely preparation and submission of annual financial
statements for the past two financial years, as well as his omission to sign the
© Study Shack 2024. All rights Reserved +27 68 812 0934
