LML4806 Company law Study unite 1 2023 with verified questions and answers

Types and Forms of Companies 1. Profit Company 2. Non - profit company Profit companies 4 tipes 1. Sate owned - schedule 2/3 of PFMA -Municipality - National government business 2. Public - can sell shares to public & freely transferable -Can be listed on JSE 3. Personal - Professional association e.g Attorneys - Directer jointly and severely liable 4. Private - Cant sell shares to public MOI forbids it. - Not freely transferable - Fudtrust matter. Section 66: Board, directors and prescribed officers - S 66(1): business of a company must be managed by or under direction of its board - directors have a duty to manage the company but shareholders retain control over the directors by their power to appoint and remove directors - before certain transactions can take place, such transactions must be approved by shareholders, either by way of special or ordinary resolution - a company's own MOI can restrict the powers of directors or others to act i.r.o a particular matter - MOI can provide that certain transactions have to be pre-approved by shareholders - shareholder: holder of share issued by a company and who is entered as such in the certificated or uncertificated securities register of the company - for purposes of part F of Ch 2 person who is entitled to exercise any voting rights in relation to a company, irrespective of the form, title or nature of the securities to which those voting rights are attached - share: one of the units into which the proprietary interest in a profit company is divided - shareholders meeting: meeting of those holders of a company's issued securities who are entitled to exercise voting rights in relation to that matter Important principles - meeting must be properly called and convened - properly convened if the prescribed notice for convening the meeting was given by authorised - notice must be given to all persons who are entitled - meeting must be convened for a time, date and place that is accessible to shareholders - meeting may only commence if a quorum is present - quorum is minimum number of members who have to be present at meeting before it can begin Record date S 59 S 59. Record date for determining shareholder rights - record date: NB because it's the date that determines shareholder rights, e.g. right to vote at meeting - board of directors may set a record date for determining which shareholders are entitled to: o receive notice of shareholders' meeting o participate in and vote at a shareholders' meeting o decide any matter by written consent or electronic communication - record date may not be earlier than date on which it is determined or more than 10 business days before date on which event or action is scheduled to occur - must be published to shareholders in manner that satisfies requirements - where board doesn't determine record date, unless the MOI or rules of company provide otherwise, record date is: o in case of a meeting, latest date by which company is required to give shareholders notice of that meeting; or o date of action or event Calling of a shareholders meeting S 61. Shareholders Meeting S 61. Shareholders Meeting - board of directors, or any other person specified in the company's MOI or rules, may call a shareholders' meeting at any time - A shareholders' meeting must be called in the following circumstances: o at any time that the board is required to convene a meeting and to refer a matter to decision by shareholders as provided for in the Companies Act or by the MOIT o when a meeting is demanded by shareholders, provided that the demand is signed by the holders of at least 10 % of the voting rights (company's MOI may specify a lower percentage Notice of meetings Section 62 and 63(3) - must be in writing & include date, time and place & include record date if set - explain the general purpose of the meeting and any other specific purposes - public company or non-profit company that has voting members notice should be given 15 business days before date of meeting - for any other company, notice must be sent 10 business days before date of meeting - provisions of MOI may prescribe longer minimum notice - a copy of any proposed resolution which is to be considered at the meeting, must accompany the notice - should indicate the % voting rights required for the resolution to be adopted - notice convening annual general meeting of a company must contain a summary of the financial statements that will be tabled at the meeting - should also explain the procedure that a shareholder can follow to obtain a complete copy of the annual financial statements for the preceding financial year - notice convening a meeting must contain a prominent statement that a shareholder is entitled to appoint a proxy to attend, participate in, and vote at the meeting - notice should indicate that meeting participants will be required to provide satisfactory proof of identity at the meeting - where company has failed to give notice or if there has been a defect in giving of the notice may proceed if persons entitled to vote are present at the meeting, acknowledge actual receipt of notice and agree to waive notice or ratify defective notice - if material defect relates only to one or more particular matters, any such matter may be taken off the agenda and notice will remain valid for remaining matters - shareholder who is present at a meeting is deemed to have received or waived notice of the meeting Postponement and adjournment of meetings Section 64(4)-(13) - meeting may be postponed or adjourned for a week under following conditions: o within 1 hr after appointed time, quorum is not present o when quorum not present at postponed or adjourned meeting, members present in person or by proxy will be deemed to constitute quorum and o if there is other business on the agenda of the meeting, consideration of that matter may be postponed to a later time in the meeting without motion or vote - chairperson of a meeting where quorum is not present within 1 hr of scheduled starting tie may extend limit for a reasonable length of time on grounds of exceptional circumstances or that one or more shareholders having been delayed, have communicated intention to attend the meeting and those shareholders, together with others in attendance would constitute a quorum - one hour rule and postponement of one week is an alterable provision - members of a company can agree to different periods in the MOI - notice of postponement only if location different - shareholders' meeting may be adjourned without further notice on a motion supported by persons with majority of voting rights - may either be at a fixed time and place or until further notice as agreed to at the meeting - ordinarily may not be adjourned beyond 120 business days after record date or 60 business days after date of adjournment - can be altered by provisions of company's MOI Representation by proxy Section 58 - proxy: person who is appointed to represent a shareholder at a meeting - Companies Act changes common law by allowing shareholder to appoint any individual as proxy (doesn't have to be member) - provisions of MOI may allow a shareholder to appoint two or more proxies - appointment must be in writing and signed by shareholder - remains valid for one year after it was signed - may also appoint proxy for specific time specified in appointment form - proxy may delegate authority to act to another person - proxy appointment form must be delivered to company prior to proxy exercising any rights at a shareholders' meeting - company can't compel shareholder to make irrevocable proxy appointment - appointment of proxy automatically suspended where the shareholder acts directly on a particular matter - shareholder can revoke appointment by cancelling it in writing, or making a later inconsistent appointment of a proxy and delivery a copy of the revocation instrument to the proxy and the company - at the meeting proxy is entitled to vote as he or she thinks fit, unless shareholder has indicated on proxy appointment form whether the proxy should vote in favour of or against a particular resolution - company could invite shareholders on proxy appointment form to appoint proxy from list of names provided by company but can't compel shareholders to choose one or more persons from the list Quorum Section 64 - unless otherwise stated in MOI, shareholders' meeting may not begin until persons with at least 25% of voting rights are present - if company has more than two shareholders, a meeting may not begin or a matter debated, unless at least three shareholders are present and all can exercise required percentage of voting rights Conduct of meetings Section 63 - voting on any matter may be conducted by a show of hands or through a poll - where by a show of hands, any person present and entitled to vote must only have one vote - where by poll, entitled to exercise all voting rights attached to shares held or represented by that eperson - company may provide for meeting to be conducted by electronic communication - where a person abstains or fails to exercise his or her vote on a resolution, person is deemed to have voted against resolution Majority rule - when a person becomes a shareholder bound by the decision of the majority Some exceptions to applicable rules and formalities Section 57(2) -(6) - shareholder of profit company, other than state-owned, with only one shareholder may exercise all of the voting rights pertaining to the company - rules i.r.t. record date, proxies, notice of meetings, etc. don't apply - where profit company, other than state-owned, has only one director director may exercise any power of perform any function of the board at any time, except to extent provided for by MOI - where every shareholder is also a director of a particular company, other than state-owned, any matter required to be referred by board to shareholders for decision may be decided by shareholders at any time - every director must be personally present at board meeting when matter referred - quorum must be present and a resolution accepted by enough shareholders to either be ordinary or special resolution - board of a company that holds any securities of a second company may authorise nay person to act as its rep at any shareholders' meeting of second company Shareholders acting other than at a meeting Section 60 - Act provides that it is possible to take decision without convening a meeting - for ordinary resolution, company must submit proposed resolution to every person entitled to vote can do so within 20 days - 10 days after adopting resolution, company must deliver statement describing results of vote, consent process or election to every shareholder entitled to vote - no business that is required to be conducted at agm of company may be concluded without convening a meeting Annual general meeting Section 61(7) - (10) - first agm must occur not later than 18 months after company's date of incorporation - subsequent agms must not be later than 15 months after date of first agm - following matters must be discussed: o presentation of directors' report, audited financial statement for immediately preceding financial year and audit committee report o election of directors o appointment of auditor for ensuing financial year and appointment of audit committee and o any matters raised by shareholders, with or without advance notice to the company Convening meetings in special circumstances Section 61(11) - (12) - when company can't convene meeting because directors are incapacitate or has no directors any other person authorised by MOI can convene meeting or if no authorised person, any shareholder can request Companies Tribunal to issue administrative order for meeting to be convened - if company fails to convene a meeting for any other reason, shareholder may apply to court for order requiring company to convene Decisions of shareholders and others Section 65(7) - (11): Shareholder resolutions Ordinary resolutions - resolution adopted with support of more than 50% of voting rights exercised (or with higher percentage as per MOI) - can be defined by MOI differently for different transactions - at all times must be a margin of at least 10 percentage points between the requirements for adoption of an ordinary resolution and that of a special resolution - S 65(8) provides that a resolution for the removal of a director can't require a higher percentage than 51% Special resolutions - adopted with support of at least 75% of voting rights exercised or a different percentage as specified in a company's MOI - required when taking the following decisions: o amendment of MOI o approving voluntary winding-up o approval of a sale of assets, a merger, an amalgamation or a scheme of arrangement o approval of directors' remuneration o when required by MOI - can be defined differently for different transactions Davey and Others v Inyanga Petroleum prescribed proxy form required proxy-giver to set out the number of shares i.r.o. which he was authorising the proxy to vote. Was not done and court held that it was essential that extent of authority conferred upon holder of the proxy should be disclosed, and that non-compliance in this respect was a material omission Ebrahimi v Westbourne A company had operated effectively as a partnership between two ( Mr Ebrahimi and Mr Nazar) and then later three directors (inclusion of Mr Nazar's son). During this time no dividends had ever been paid, but the directors had however received salaries. After a dispute with the applicant, Mr Nazar and his son combined their voting power to remove the applicant as a director. Mr Ebrahimi then sought an order for the other to purchase his shares, or alternatively for the company to be wound up on the just and equitable grounds required. The company had promised to begin to pay dividends Held: In the case of a small company the rights and obligations went beyond that of bare company law requirements. The applicant had been excluded from being involved in the management of the company against his reasonable expectations and this equated to him being effectively unable to dispose of his interest. Equitable considerations can come to be applied where the association has personal characteristics and rests on a relationship of trust and confidence, and all members are expected to take an active part and share transfers are restricted thus the company should be wound up. Gets v Spaarwater Goldmining Company argued that certain proxies invalid because proxy forms left undated by proxy-giver and proxy-holder and therefore did not comply with articles of association of company Court held that validity or otherwise of appointment of proxy must depend on the facts of each case. Court held that can be little doubt that a material departure from prescribed form could well invalidate proxy form. Court found that form complied in every respect save for date of execution. Held that the proxy was valid and non-compliance in this single respect was not a material nature Gohlke and Schneider Despite the general rule that corporate decisions are to be taken at properly constituted meetings of the company and not by separately obtaining the individual assent of members, numerous South African and British decisions recognise that a company can perform certain acts validly without any meeting being held, provided that all members were fully aware of what was being done and unanimously assented thereto. For example, the principle of unanimous assent enabled the Appellate Division to hold in Gohlke and Schneider v Westies Minerale (Edms) Bpk (1970) that the members by their unanimous assent, as evidenced by a contract signed by all of them, could validly appoint a director to the board without any formal meeting being held. In coming to this conclusion the court relied on a number of decisions where widely different acts were regarded as the acts of the company simply because all the members assented thereto. Apparently no restrictions in addition to those applicable to formal resolutions apply, except of course that all members must be unanimous in their assent and must be fully cognisant of what they have assented to. As in the case of a formal resolution an illegal result cannot be obtained validly through unanimous assent. It may be open to doubt whether authority to litigate can be construed on the basis of unanimous assent of a company's shareholders. Sammel & Others v President Brand Gold Mining by becoming a shareholder in a company a person undertakes to be bound by the decisions of the prescribed majority of shareholders.... that principle of supremacy of the majority is essential is the proper functioning of companies