LML4806 PORTFOLIO MEMO - MAY/JUNE 2025 - SEMESTER 1 - UNISA - DUE DATE :- 17 MAY 2025 - (DETAILED ANSWERS WITH FOOTNOTES AND BIBLIOGRAPHY - DISTINCTION GUARANTEED!)

LML4806 PORTFOLIO MEMO - MAY/JUNE 2025 - SEMESTER 1 - UNISA - DUE DATE :- 17 MAY 2025 - (DETAILED ANSWERS WITH FOOTNOTES AND BIBLIOGRAPHY - DISTINCTION GUARANTEED!) QUESTION 1 [20] 1.1 Briefly discuss the options that are available to the chairperson or presiding officer at a shareholders’ meeting when it is established that the meeting lacks a proper quorum for the meeting to begin or for a specific matter to be considered. (5) 1.2 The board of directors of Isondo (Pty) Ltd is contemplating issuing shares to Varsha who is currently not a shareholder of the company. Varsha’s brother, Vishal, is a prescribed officer and shareholder of Isondo (Pty) Ltd. The board is concerned whether its decision to issue the shares to Varsha may contravene the provisions of the Companies Act 71 of 2008. Answer the following questions with reference to the Companies Act 71 of 2008 and the facts provided: 1.2.1 Advise the board of directors of Isondo (Pty) Ltd whether it may proceed to issue the shares to Varsha without obtaining shareholder approval. (5) 1.2.2 Advise the board of directors on the meaning and rationale of pre-emptive rights, and on whether the current shareholders of Isondo (Pty) Ltd have any rights of pre-emption. (10) QUESTION 2 [20] 2.1 ABC Nominees (Pty) Ltd and Richmond Fund Managers Ltd hold 3% and 8% of the voting rights associated with the issued ordinary shares of Norfolk Resources Ltd, respectively. ABC Nominees (Pty) Ltd and Richmond Fund Managers Ltd believe that Norfolk Resources Ltd’s oil and gas business is failing due to the incompetence of the two executive directors, Lungile and Martin, who have been given the responsibility to manage that business. ABC Nominees (Pty) Ltd and Richmond Fund Managers Ltd have, therefore, submitted a written and signed demand for Norfolk Resources Ltd to hold a shareholders’ meeting to reconstitute its board of directors by removing Lungile and Martin as directors. With reference to the Companies Act 71 of 2008, advise the board of directors on the procedural requirements that Norfolk Resources Ltd must follow before the removal of Lungile and Martin as directors may be considered by the shareholders at a shareholders’ meeting envisaged in the scenario above. (8) 2.2 The board of directors of Zentech Solutions Ltd received two takeover bids, one from a majority shareholder of the company, Imali Ltd, and the other from Ndugu Holdings Ltd. The board of Zentech Solutions Ltd believes in good faith that the takeover bid from Ndugu Holdings Ltd, which is slightly higher, is in the company’s best interests. It issues further shares of the company to Ndugu Holdings Ltd in order to dilute the majority shareholding of Imali Ltd and to ensure that the takeover bid made by Ndugu Holdings Ltd would be successful. Imali Ltd wishes to challenge the issue of the additional shares to Ndugu Holdings Ltd by the board of Zentech Solutions Ltd on the basis that the board breached its fiduciary duty to act for a proper purpose in issuing these shares. The board of Zentech Solutions Ltd is of the view that it was acting in the company’s best interests in issuing the additional shares, especially since none of the directors obtained any personal advantage for themselves. With reference to the Companies Act 71 of 2008 and relevant case law, advise Imali Ltd of its prospects of success in having the issue of the shares to Ndugu Holdings Ltd set aside by a court on the basis that the directors of Imali Ltd breached their fiduciary duty to act for a proper purpose. (12) QUESTION 3 [20] 3.1 Consolidated Investments Ltd is a company that invests in mining businesses in South Africa. Its business undertaking consists solely of its shareholdings in three companies, as follows: • It holds 100% of the ordinary shares in Reef Iron Ore Ltd. • It holds 58% of the ordinary shares in Creek Gold (Pty) Ltd. The remaining ordinary shares in Creek Gold (Pty) Ltd are held by various individual and institutional shareholders. • It holds 30% of the ordinary shares in Millenium Platinum Ltd. The remaining 70% of the ordinary shares in Millenium Platinum Ltd are held by Creek Gold (Pty) Ltd. With reference to the Companies Act 71 of 2008: 3.1.1 Explain whether the companies in the scenario above constitute a group of companies. 3.1.2 Discuss the main consequences that flow from the existence of a group of companies. (5) (10) 3.2 On 15 January 2025 Colt Trucking Ltd concluded a written agreement with Fuel Masters Ltd, in terms of which Fuel Masters Ltd would supply and deliver specified quantities of diesel to Colt Trucking Ltd’s transport and logistics operations in Bloemfontein every month for a period of two years. On 10 May 2025 Colt Trucking Ltd was placed under business rescue as it was financially distressed, and Annastacia was appointed as its business rescue practitioner. Annastacia and the board of directors of Colt Trucking Ltd have since discovered that Colt Trucking Ltd can purchase diesel from Thabo’s Diesels (Pty) Ltd at a much lower cost instead of purchasing it from Fuel Masters Ltd. With reference to the Companies Act 71 of 2008 and the facts provided, explain whether the fact that Colt Trucking Ltd has been placed under business rescue proceedings will allow Annastacia to cancel the contract between Colt Trucking Ltd and Fuel Masters Ltd. (5) QUESTION 4 [20] 4.1 Petersen Auditing Inc has been serving as the auditor of Cargo SA Ltd (‘the company’) for the past 80 years. Petersen Auditing Inc has also been offering and providing some consulting services to the company over these years. Thabiso, one of the partners of Petersen Auditing Inc, will have served as the individual designated auditor in charge of the audit of the company for five consecutive financial years when the current financial year of the company comes to an end on 31 August 2025. Nico, who was recently appointed as a member of the company’s audit committee, will be attending the audit committee’s meeting to decide whether Petersen Auditing Inc, with Thabiso as the individual designated auditor, should be re-appointed as the company’s auditor for the upcoming financial year that will end on 31 August 2026. With reference to the Companies Act 71 of 2008, advise Nico on the matters that the audit committee should consider when determining whether Petersen Auditing Inc, with Thabiso as the individual designated auditor, should be re-appointed as the auditor of Cargo SA Ltd for the financial year that will end on 31 August 2026. (8) 4.2 Brett is a salesperson at Apex Auto Ltd, a car dealership that specialises in selling sports cars. At a monthly meeting with the salespersons, Brett overhears the managing director of Apex Auto Ltd on a telephone call saying that Apex Auto Ltd is in huge trouble as their sales of sports cars have decreased drastically in the past two financial years and the company may have to go into business rescue. Brett realises that once this information becomes public knowledge, the price of the shares of Apex Auto Ltd will decrease significantly. Brett immediately calls his broker Bongiwe, and instructs him to sell all his shares in Apex Auto Ltd on his behalf as well as all his mother’s shares in the company. Bongiwe sells all the shares held by Brett and his mother in Apex Auto Ltd. Brett also advises his cousin, Nelly, to sell all her shares in Apex Auto Ltd and tells her that news might break soon that Apex Auto Ltd will go into business rescue. Nelly decides not to sell her shares as she thinks it is unlikely that the company will go into business rescue, but she mentions to her boyfriend, Abel, that Apex Auto Ltd might be going into business rescue. The following week the board of directors of Apex Auto Ltd issues an announcement that the company will be going into business rescue. The share price of the shares in Apex Auto Ltd immediately plummets. Discuss whether Brett, Nelly and Bongiwe have committed any offences relating to insider trading. (You should deal with each person separately and you should not include a discussion of the definitions of “insider” or “insider trading” or discuss any defences to the relevant offences in your answer). (12) TOTAL: [80]