LML4806 Company Law Exam
Questions and Answers
Company Secretary - ANSWER-- public & state owned company are obliged to appoint
one
- company must maintain record of company secretaries
- secretary is chief administration officer
- should be someone with knowledge of and experience in relevant legislation
- accountable to board of directors
- duties - guide directors on duties; powers & responsibilities; make directors aware of
law
- board may adopt a resolution to remove company secretary
.Compromise - ANSWER-- agreement or arrangement or restructuring of claims
between a company and its creditors in terms of which the creditors agree to accept
less than their full claims against the company
- binding on all companies creditors
.Compromise proposal is divided into three parts - ANSWER-- background
- the proposal itself
- assumptions and conditions
.Corporate social responsibility - ANSWER-- Seeks to make companies responsible
members of the community
- Businesses have a responsibility towards the societies in which they operate and that
this responsibility needs to be managed
- Voluntary commitment by companies to manage their role within society responsibly
- marks a departure from the traditional perception that the only object of business is to
make profits
- eg purpose of CA is to promote development of SA economy by encouraging
transparency, and high standards of corporate governance
- CA seeks to reaffirm the concept of the company as a means of achieving economic
and social benefits
- CA seeks to promote development of companies within all sectors of the economy & to
encourage active participation in economic organisation, management and productivity
- CA seeks to encourage efficient and responsible management of companies
- CA provides for non profits that are incorporated for social activities, public benefit,
cultural activities or group interest
- CA may offer a wide circle of stakeholders
- CA requires certain categories of companies to appoint a social and ethics committee
to monitor company activities
.Delinquency - ANSWER-- S162(1)
- person grossly abused the position of director
- took personal advantage of info or an opportunity contrary to S76(2)(a)
, - intentionally or by gross negligence inflicted harm upon the company or subsidiary of
company
- acted in a manner that amounted to gross negligence, wilful misconduct or breach of
trust in relation to the performance of the directors functions
- Gihwala v Grancy property - 3 directors appropriated financial benefit or themselves.
Court held that their conduct entailed gross abuse of position of director. Action was
intentional. Therefore breach of trust
.Directors liability ito duty to exercise care, skill and diligence - ANSWER-- Fisheries
development v Jorgensen 1980 - required degree of care and skill to a large degree
depends on nature of business and specific duties assigned to director
- non exec director not expected to give continuous attention to affairs of company
- not expected of a director to have special expertise or experience
- expected - exercise degree of care and skill once could reasonable expect from a
person with his knowledge or experience
- Remedies - based on contract or delict
- Directors are not liable for mere errors of judgement
- Directors may rely on officials and management unless there are reasons for
questioning the judgement of such officials. A director must still give due regard and
exercise his own judgement in doing so
- S76 partially codified duty of care and skill. Directors must exercise duty of care and
skill and diligence that may be reasonably expected of a person carrying out same
functions in relation to company as those carried out by director
- objective test - what would reasonable director have done. Contains subjective
elements and therefore a dual test
- S76(4) if director taken diligent steps to become informed about the matter, no
personal financial interest, rational basis for believing decision in best interests of
company - can be excused
.Discuss SH meeting? - ANSWER-S62(3) - a SH meeting should include date, time,
place, record date, general purpose, specific purpose, copy of proposed resoultion,
notice of percentage of voting rights
S61(4) - failure to hold a SH meeting does not affect company existance or validity of
any action taken by company
Questions and Answers
Company Secretary - ANSWER-- public & state owned company are obliged to appoint
one
- company must maintain record of company secretaries
- secretary is chief administration officer
- should be someone with knowledge of and experience in relevant legislation
- accountable to board of directors
- duties - guide directors on duties; powers & responsibilities; make directors aware of
law
- board may adopt a resolution to remove company secretary
.Compromise - ANSWER-- agreement or arrangement or restructuring of claims
between a company and its creditors in terms of which the creditors agree to accept
less than their full claims against the company
- binding on all companies creditors
.Compromise proposal is divided into three parts - ANSWER-- background
- the proposal itself
- assumptions and conditions
.Corporate social responsibility - ANSWER-- Seeks to make companies responsible
members of the community
- Businesses have a responsibility towards the societies in which they operate and that
this responsibility needs to be managed
- Voluntary commitment by companies to manage their role within society responsibly
- marks a departure from the traditional perception that the only object of business is to
make profits
- eg purpose of CA is to promote development of SA economy by encouraging
transparency, and high standards of corporate governance
- CA seeks to reaffirm the concept of the company as a means of achieving economic
and social benefits
- CA seeks to promote development of companies within all sectors of the economy & to
encourage active participation in economic organisation, management and productivity
- CA seeks to encourage efficient and responsible management of companies
- CA provides for non profits that are incorporated for social activities, public benefit,
cultural activities or group interest
- CA may offer a wide circle of stakeholders
- CA requires certain categories of companies to appoint a social and ethics committee
to monitor company activities
.Delinquency - ANSWER-- S162(1)
- person grossly abused the position of director
- took personal advantage of info or an opportunity contrary to S76(2)(a)
, - intentionally or by gross negligence inflicted harm upon the company or subsidiary of
company
- acted in a manner that amounted to gross negligence, wilful misconduct or breach of
trust in relation to the performance of the directors functions
- Gihwala v Grancy property - 3 directors appropriated financial benefit or themselves.
Court held that their conduct entailed gross abuse of position of director. Action was
intentional. Therefore breach of trust
.Directors liability ito duty to exercise care, skill and diligence - ANSWER-- Fisheries
development v Jorgensen 1980 - required degree of care and skill to a large degree
depends on nature of business and specific duties assigned to director
- non exec director not expected to give continuous attention to affairs of company
- not expected of a director to have special expertise or experience
- expected - exercise degree of care and skill once could reasonable expect from a
person with his knowledge or experience
- Remedies - based on contract or delict
- Directors are not liable for mere errors of judgement
- Directors may rely on officials and management unless there are reasons for
questioning the judgement of such officials. A director must still give due regard and
exercise his own judgement in doing so
- S76 partially codified duty of care and skill. Directors must exercise duty of care and
skill and diligence that may be reasonably expected of a person carrying out same
functions in relation to company as those carried out by director
- objective test - what would reasonable director have done. Contains subjective
elements and therefore a dual test
- S76(4) if director taken diligent steps to become informed about the matter, no
personal financial interest, rational basis for believing decision in best interests of
company - can be excused
.Discuss SH meeting? - ANSWER-S62(3) - a SH meeting should include date, time,
place, record date, general purpose, specific purpose, copy of proposed resoultion,
notice of percentage of voting rights
S61(4) - failure to hold a SH meeting does not affect company existance or validity of
any action taken by company
