AUI4862
ASSIGNMENT 2 2025
UNIQUE NO.
DUE DATE: 2025
, QUESTION 1 (25 marks)
1.1 Discussion of the Companies Act Requirements (12 marks)
The Companies Act 71 of 2008, specifically Sections 75 and 76, outlines the fiduciary
duties and disclosure obligations of directors in South Africa.
Section 75(5) stipulates that a director who has a personal financial interest in a
matter being considered by the board must promptly disclose the nature and
extent of that interest to the board.
In the scenario involving Mr. Thabo Shabalala, who is a director of Holiday
Factory (Pty) Ltd, his failure to disclose his indirect interest—through his
brother, who is the majority shareholder of Iceland (Pty) Ltd—amounts to a
breach of this requirement.
Additionally, he should have recused himself from all board discussions and
voting processes related to the awarding of the contract to Iceland (Pty) Ltd, as
per governance best practices.
Section 75(8) indicates that a transaction entered into without the necessary
disclosures and approvals may be declared void or may be rendered
unenforceable.
The company’s Memorandum of Incorporation (MOI) may further reinforce
these statutory provisions by requiring that shareholder approval—obtained via
a poll at a general meeting—be secured before finalising such a contract.
Failure to meet these disclosure and approval requirements can expose both the
director and the company to legal risks, including personal liability for losses
incurred and possible civil or criminal penalties.
Conclusion:
The failure to disclose Mr. Shabalala’s indirect interest and obtain prior shareholder
approval suggests a breach of the Companies Act. The transaction with Iceland (Pty)
Ltd may thus be considered invalid, with possible repercussions for non-compliance and
director misconduct.
ASSIGNMENT 2 2025
UNIQUE NO.
DUE DATE: 2025
, QUESTION 1 (25 marks)
1.1 Discussion of the Companies Act Requirements (12 marks)
The Companies Act 71 of 2008, specifically Sections 75 and 76, outlines the fiduciary
duties and disclosure obligations of directors in South Africa.
Section 75(5) stipulates that a director who has a personal financial interest in a
matter being considered by the board must promptly disclose the nature and
extent of that interest to the board.
In the scenario involving Mr. Thabo Shabalala, who is a director of Holiday
Factory (Pty) Ltd, his failure to disclose his indirect interest—through his
brother, who is the majority shareholder of Iceland (Pty) Ltd—amounts to a
breach of this requirement.
Additionally, he should have recused himself from all board discussions and
voting processes related to the awarding of the contract to Iceland (Pty) Ltd, as
per governance best practices.
Section 75(8) indicates that a transaction entered into without the necessary
disclosures and approvals may be declared void or may be rendered
unenforceable.
The company’s Memorandum of Incorporation (MOI) may further reinforce
these statutory provisions by requiring that shareholder approval—obtained via
a poll at a general meeting—be secured before finalising such a contract.
Failure to meet these disclosure and approval requirements can expose both the
director and the company to legal risks, including personal liability for losses
incurred and possible civil or criminal penalties.
Conclusion:
The failure to disclose Mr. Shabalala’s indirect interest and obtain prior shareholder
approval suggests a breach of the Companies Act. The transaction with Iceland (Pty)
Ltd may thus be considered invalid, with possible repercussions for non-compliance and
director misconduct.
