LML4806/201/2/2016
Tutorial Letter 201/2/2016
Company Law
LML4806
Semester 2
Department of Mercantile Law
IMPORTANT INFORMATION:
This tutorial letter contains important information
about your module.
, CONTENTS
1. FEEDBACK ON ASSIGNMENT 01 ....................................................................................................... 3
2. FEEDBACK ON ASSIGNMENT 02 ....................................................................................................... 4
3. OCTOBER/NOVEMBER 2015 EXAMINATION ..................................................................................... 5
4. FEEDBACK ON OCTOBER/ NOVEMBER 2015 EXAMINATION ........................................................ 9
2
, LML4806/201/2/2016
Dear Student
1. FEEDBACK ON ASSIGNMENT 01
Several important consequences flow from the existence of a group, even though the law does
not recognise a separate legal personality for the group. The consequences are as follows:
In terms of section 48(2) of the Companies Act 71 of 2008 (hereafter referred to as “the
Act”) a subsidiary may acquire shares in its holding company, provided that the
acquisition does not amount to more than 10 per cent, in aggregate, of the number of any
issued shares of the holding company. Furthermore, the 10 per cent cap applies to all the
subsidiaries taken together. The voting rights attached to these shares cannot be
exercised as long as they are held by the subsidiary of the holding company and as long
as the latter is regarded as the subsidiary of the holding company.
In terms of section 76 of the Act, a director must not use his or her position as a director,
or any information obtained in his or her capacity as a director, to gain an advantage
either for himself or herself or for another person other than the company or a wholly
owned subsidiary of the company. In addition, a director of a company is prohibited from
using that information to cause harm to the company or its subsidiary.
The definition of an employee share scheme as it appears in terms of section 95 of the
Act refers to a scheme established by a company, by means of a trust or otherwise, for
the purpose of offering participation therein solely to employees and officers of the
company or of a subsidiary of the company. In this way, an employee of one company in
the group is treated as being an employee of the holding company or another subsidiary
company, that is, as an employee of the group.
Section 112 (Proposals to dispose of all or greater part of assets or undertaking) and
section 113 (Proposals for amalgamation or merger) of the Act do not apply to a proposal
to dispose of all or the greater part of the assets or undertaking of a company if that
disposal would constitute a transaction between a wholly owned subsidiary and its
holding company, or between or among two or more wholly owned subsidiaries of the
same holding company, or between a wholly owned subsidiary of a holding company on
3
Tutorial Letter 201/2/2016
Company Law
LML4806
Semester 2
Department of Mercantile Law
IMPORTANT INFORMATION:
This tutorial letter contains important information
about your module.
, CONTENTS
1. FEEDBACK ON ASSIGNMENT 01 ....................................................................................................... 3
2. FEEDBACK ON ASSIGNMENT 02 ....................................................................................................... 4
3. OCTOBER/NOVEMBER 2015 EXAMINATION ..................................................................................... 5
4. FEEDBACK ON OCTOBER/ NOVEMBER 2015 EXAMINATION ........................................................ 9
2
, LML4806/201/2/2016
Dear Student
1. FEEDBACK ON ASSIGNMENT 01
Several important consequences flow from the existence of a group, even though the law does
not recognise a separate legal personality for the group. The consequences are as follows:
In terms of section 48(2) of the Companies Act 71 of 2008 (hereafter referred to as “the
Act”) a subsidiary may acquire shares in its holding company, provided that the
acquisition does not amount to more than 10 per cent, in aggregate, of the number of any
issued shares of the holding company. Furthermore, the 10 per cent cap applies to all the
subsidiaries taken together. The voting rights attached to these shares cannot be
exercised as long as they are held by the subsidiary of the holding company and as long
as the latter is regarded as the subsidiary of the holding company.
In terms of section 76 of the Act, a director must not use his or her position as a director,
or any information obtained in his or her capacity as a director, to gain an advantage
either for himself or herself or for another person other than the company or a wholly
owned subsidiary of the company. In addition, a director of a company is prohibited from
using that information to cause harm to the company or its subsidiary.
The definition of an employee share scheme as it appears in terms of section 95 of the
Act refers to a scheme established by a company, by means of a trust or otherwise, for
the purpose of offering participation therein solely to employees and officers of the
company or of a subsidiary of the company. In this way, an employee of one company in
the group is treated as being an employee of the holding company or another subsidiary
company, that is, as an employee of the group.
Section 112 (Proposals to dispose of all or greater part of assets or undertaking) and
section 113 (Proposals for amalgamation or merger) of the Act do not apply to a proposal
to dispose of all or the greater part of the assets or undertaking of a company if that
disposal would constitute a transaction between a wholly owned subsidiary and its
holding company, or between or among two or more wholly owned subsidiaries of the
same holding company, or between a wholly owned subsidiary of a holding company on
3
