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AUI4862 Assignment 2(COMPLETE ANSWERS) SEMESTER 1
2025 DUE 2025 ;100% trusted ,comprehensive and complete
reliable solution with clear explanation
QUESTION 1 25 marks
Part A
1.1 Discussion on the Requirements of the Companies Act 2008 in
Relation to the Contract Entered into by Holiday Factory (Pty) Ltd
with Iceland (Pty) Ltd
Under the Companies Act 2008 (Act No. 71 of 2008), the requirements
regarding personal financial interests and potential conflicts of interest
are clearly outlined to prevent any abuse of power and to ensure that
decisions made by directors are in the best interest of the company and its
shareholders. In this context, there are several key provisions and
requirements related to the situation involving Thabo Shabalala and the
contract between Holiday Factory (Pty) Ltd and Iceland (Pty) Ltd.
1. Personal Financial Interest and Conflict of Interest
Section 75 of the Companies Act 2008 governs directors' conflicts of
interest and the disclosure of personal financial interests in matters
related to the company. In this case, Thabo Shabalala, being a director
of Holiday Factory (Pty) Ltd, has a personal financial interest due to his
brother, Oscar, being the majority shareholder of Iceland (Pty) Ltd, the
company with which Holiday Factory (Pty) Ltd entered into the contract.
According to Section 75(1) of the Companies Act, a director must
disclose any personal financial interest that they may have in a
transaction or proposed transaction of the company.
2
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Because Thabo's brother Oscar is the majority shareholder of Iceland
(Pty) Ltd, this creates a clear potential for a conflict of interest, as
Thabo's personal interests could influence his decision-making regarding
the contract. Section 75(3) requires that the director (Thabo) disclose
the nature and extent of his interest in the contract at the meeting of the
board of directors before any decision is made or contract is entered into.
This disclosure must be made to ensure transparency and to allow the
board to evaluate whether the contract is in the best interest of Holiday
Factory (Pty) Ltd.
2. Board Approval and General Meeting Resolution
In accordance with the clause from the Memorandum of Incorporation
provided, the contract entered into by Holiday Factory (Pty) Ltd with
Iceland (Pty) Ltd will be valid only if the authority of the company in
a general meeting is obtained through a poll vote prior to entering into
the contract. This requirement aligns with the provisions of Section 75(4)
of the Companies Act, which mandates that a contract entered into by a
company with a related party (in this case, a company with an interest
held by a director's relative) must be approved by shareholders in a
general meeting before the contract can be enforced.
The term “prior to the contract being entered into” means that the
approval by shareholders must occur before the finalization or
signing of the contract. The poll vote ensures that the decision is made
transparently, with a majority of shareholders agreeing to the contract
despite the potential conflict of interest involved with Thabo's position
as a director and his familial connection to Oscar.
3. Consequences of Non-Compliance
If the company does not comply with the disclosure requirements or fails
to obtain the necessary shareholder approval for the contract, the
3
Downloaded by Vincent kyalo (MULEIKYALO72@GMAIL
, lOMoAR cPSD| 48011787
TL102_0_2025
AUI4862 Assignment 2(COMPLETE ANSWERS) SEMESTER 1
2025 DUE 2025 ;100% trusted ,comprehensive and complete
reliable solution with clear explanation
QUESTION 1 25 marks
Part A
1.1 Discussion on the Requirements of the Companies Act 2008 in
Relation to the Contract Entered into by Holiday Factory (Pty) Ltd
with Iceland (Pty) Ltd
Under the Companies Act 2008 (Act No. 71 of 2008), the requirements
regarding personal financial interests and potential conflicts of interest
are clearly outlined to prevent any abuse of power and to ensure that
decisions made by directors are in the best interest of the company and its
shareholders. In this context, there are several key provisions and
requirements related to the situation involving Thabo Shabalala and the
contract between Holiday Factory (Pty) Ltd and Iceland (Pty) Ltd.
1. Personal Financial Interest and Conflict of Interest
Section 75 of the Companies Act 2008 governs directors' conflicts of
interest and the disclosure of personal financial interests in matters
related to the company. In this case, Thabo Shabalala, being a director
of Holiday Factory (Pty) Ltd, has a personal financial interest due to his
brother, Oscar, being the majority shareholder of Iceland (Pty) Ltd, the
company with which Holiday Factory (Pty) Ltd entered into the contract.
According to Section 75(1) of the Companies Act, a director must
disclose any personal financial interest that they may have in a
transaction or proposed transaction of the company.
2
Downloaded by Vincent kyalo (MULEIKYALO72@GMAIL
, lOMoAR cPSD| 48011787
TL102_0_2025
Because Thabo's brother Oscar is the majority shareholder of Iceland
(Pty) Ltd, this creates a clear potential for a conflict of interest, as
Thabo's personal interests could influence his decision-making regarding
the contract. Section 75(3) requires that the director (Thabo) disclose
the nature and extent of his interest in the contract at the meeting of the
board of directors before any decision is made or contract is entered into.
This disclosure must be made to ensure transparency and to allow the
board to evaluate whether the contract is in the best interest of Holiday
Factory (Pty) Ltd.
2. Board Approval and General Meeting Resolution
In accordance with the clause from the Memorandum of Incorporation
provided, the contract entered into by Holiday Factory (Pty) Ltd with
Iceland (Pty) Ltd will be valid only if the authority of the company in
a general meeting is obtained through a poll vote prior to entering into
the contract. This requirement aligns with the provisions of Section 75(4)
of the Companies Act, which mandates that a contract entered into by a
company with a related party (in this case, a company with an interest
held by a director's relative) must be approved by shareholders in a
general meeting before the contract can be enforced.
The term “prior to the contract being entered into” means that the
approval by shareholders must occur before the finalization or
signing of the contract. The poll vote ensures that the decision is made
transparently, with a majority of shareholders agreeing to the contract
despite the potential conflict of interest involved with Thabo's position
as a director and his familial connection to Oscar.
3. Consequences of Non-Compliance
If the company does not comply with the disclosure requirements or fails
to obtain the necessary shareholder approval for the contract, the
3
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