LML4806
EXAM PACK
2025
, lOMoARcPSD|41752181
LML4806 EXAM PREP
Bongani has been a non-executive director of Apex (Pty) Ltd since 2012. He is also a
director and sole shareholder of a management consultancy business, Infinity (Pty) Ltd.
Apex (Pty) Ltd is undergoing a process of internal restructuring. Without knowing of
Bongani’s involvement with Infinity (Pty) Ltd, one of the other directors of Apex (Pty) Ltd
proposes to the board of directors of Apex (Pty) Ltd that Infinity (Pty) Ltd should be
approached for advice on the recruitment of key staff. The board of directors of Apex
(Pty) Ltd will be voting on this issue at the next board meeting which is scheduled for
next week.
(a) Bongani seeks your advice. He wants to know whether he must disclose his
interest in this matter to the board of directors of Apex (Pty) Ltd and if so, what
procedure he must adopt to do so. (8)
Section 75 of the Companies Act 71 of 2008 (hereinafter referred to as the “Act”)
regulates these situations. In terms thereof, a director has to disclose, before a board
meeting is to take place, any personal financial interests that they may have as well as
the nature of such interests, before the matter is taken into consideration.
Section 1 of the Act defines a personal financial interest as a person’s direct material
interest of a financial, monetary or economic nature, or that could have monetary worth
attached to it.
Because Infinity (Pty) Ltd, of which Bongani is a director and sole shareholder, stands to
gain financially if Apex (Pty) Ltd names Infinity (Pty) Ltd to advise it on staff recruitment,
Bongani has a personal financial interest in this matter.
As such, Bongani will have to disclose his interest in the matter.
The following is the procedure to be followed by Bongani to disclose his interest in the
matter:
1. Prior to the consideration of the matter at the meeting, he must notify the board
of directors of his interest and its general nature;
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2. He has to disclose all relevant information to his knowledge in relation to the
matter;
3. If requested by the directors, he may provide any observations or pertinent
insights in relation to the matter;
4. If Bongani is present at the meeting, he must adjourn the meeting following any
disclosure;
5. He is not allowed to participate in the consideration of the matter;
6. Unless specifically asked to do so by the board, he is not allowed to execute any
document on behalf of the company in relation to the matter.
(b) Assume that Bongani does not disclose his interest. Explain whether the contract
between Apex (Pty) Ltd and Infinity (Pty) Ltd will nonetheless be valid. (7)
According to Section 75(7) of the Act, a board decision, transaction, or agreement
approved by the board is valid despite any personal financial interest of a director or a
person linked to a director, but only if –
1. It was approved once that interest was disclosed in the way section 75
contemplates.
2. Even though it was approved without disclosing such interest, it
a. has since been confirmed by an ordinary shareholder resolution following
disclosure of the interest or;
b. has been deemed valid by the court in accordance with Act section 75(8). In
accordance with section 75(8) of the Act, a court may, upon application from
any interested party, declare a board-approved agreement enforceable even
in cases where the director fails to comply with section 75's disclosure
requirements.
The court upheld in Omar v. Inhouse Technical Management (Pty) Ltd 2015 (3) SA 146
(WCC) that a transaction or agreement entered into would be invalid if section 75(5) of
the Companies Act was not adhered to. This is unless the agreement was approved by
the company's shareholders or found to be valid by the court.
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EXAM PACK
2025
, lOMoARcPSD|41752181
LML4806 EXAM PREP
Bongani has been a non-executive director of Apex (Pty) Ltd since 2012. He is also a
director and sole shareholder of a management consultancy business, Infinity (Pty) Ltd.
Apex (Pty) Ltd is undergoing a process of internal restructuring. Without knowing of
Bongani’s involvement with Infinity (Pty) Ltd, one of the other directors of Apex (Pty) Ltd
proposes to the board of directors of Apex (Pty) Ltd that Infinity (Pty) Ltd should be
approached for advice on the recruitment of key staff. The board of directors of Apex
(Pty) Ltd will be voting on this issue at the next board meeting which is scheduled for
next week.
(a) Bongani seeks your advice. He wants to know whether he must disclose his
interest in this matter to the board of directors of Apex (Pty) Ltd and if so, what
procedure he must adopt to do so. (8)
Section 75 of the Companies Act 71 of 2008 (hereinafter referred to as the “Act”)
regulates these situations. In terms thereof, a director has to disclose, before a board
meeting is to take place, any personal financial interests that they may have as well as
the nature of such interests, before the matter is taken into consideration.
Section 1 of the Act defines a personal financial interest as a person’s direct material
interest of a financial, monetary or economic nature, or that could have monetary worth
attached to it.
Because Infinity (Pty) Ltd, of which Bongani is a director and sole shareholder, stands to
gain financially if Apex (Pty) Ltd names Infinity (Pty) Ltd to advise it on staff recruitment,
Bongani has a personal financial interest in this matter.
As such, Bongani will have to disclose his interest in the matter.
The following is the procedure to be followed by Bongani to disclose his interest in the
matter:
1. Prior to the consideration of the matter at the meeting, he must notify the board
of directors of his interest and its general nature;
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2. He has to disclose all relevant information to his knowledge in relation to the
matter;
3. If requested by the directors, he may provide any observations or pertinent
insights in relation to the matter;
4. If Bongani is present at the meeting, he must adjourn the meeting following any
disclosure;
5. He is not allowed to participate in the consideration of the matter;
6. Unless specifically asked to do so by the board, he is not allowed to execute any
document on behalf of the company in relation to the matter.
(b) Assume that Bongani does not disclose his interest. Explain whether the contract
between Apex (Pty) Ltd and Infinity (Pty) Ltd will nonetheless be valid. (7)
According to Section 75(7) of the Act, a board decision, transaction, or agreement
approved by the board is valid despite any personal financial interest of a director or a
person linked to a director, but only if –
1. It was approved once that interest was disclosed in the way section 75
contemplates.
2. Even though it was approved without disclosing such interest, it
a. has since been confirmed by an ordinary shareholder resolution following
disclosure of the interest or;
b. has been deemed valid by the court in accordance with Act section 75(8). In
accordance with section 75(8) of the Act, a court may, upon application from
any interested party, declare a board-approved agreement enforceable even
in cases where the director fails to comply with section 75's disclosure
requirements.
The court upheld in Omar v. Inhouse Technical Management (Pty) Ltd 2015 (3) SA 146
(WCC) that a transaction or agreement entered into would be invalid if section 75(5) of
the Companies Act was not adhered to. This is unless the agreement was approved by
the company's shareholders or found to be valid by the court.
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