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October 2014

24 October 2014
08h45 12h00
15 minutes reading time +
3 hours
General Instructions

1. Check that you have the correct examination paper and that it has all its pages and sections.
2. Write clearly and only use BLACK BALL-POINT INK. Do NOT use felt-tip pens or pencils. Cross
out errors in ink do NOT use correcting fluid. Please do NOT USE HIGHLIGHTER PENS.
3. Start each answer on a fresh page, clearly numbering it at the top.
4. Write the numbers of the questions you have answered on the front page of your answer book.
5. Securely fasten all pages and check that all answers are correctly numbered.
6. Submit your working papers where applicable making sure that you clearly identify them as

Special instructions for this paper

8. Read through the question prior to attempting to answer.
9. Use fictitious names when answering questions that require the names of the author and/or the
company (e.g. memorandum, report, letter, minutes, notice, etc.); do not use your own name or
that of your employer.
10. This is an open book examination only authorised references may be used or brought
into the venue. See overleaf.
11. References to legislation, case law or other documents should include the full name when initially
noted and may thereafter be referred to in an abbreviated form if indicated as such. Sections
from the Act should be referred to where applicable and students should indicate which Act they
are referring to merely referring to the Act, unless defined, would not be sufficient.
12. Wherever the term Companies Act is used in this question paper it refers to the South
African Companies Act 71 of 2008.

Permitted Open Book Resources

Candidates are permitted to have with them in the examination room (and may refer to)
only the following legislation:

the Companies Act, 2008

the Companies Regulations 2011
the Close Corporations Act 1994



Corporate Secretaryship

October 2014

Page 2 of 9


Read the scenario and answer the questions.
The following article has appeared in the Gauteng Business TimesVoice.
Company Director held liable for proceeds gleaned from Secret Profits
The Courts of South Africa are clamping down on directors of companies
seeking to enrich themselves at the expense of their shareholders.
The Western Cape High Court has ruled against Mr Jack Knowall, former
executive director of JB Construction Limited, a company listed on the JSE
Limited, in an action brought by JB Construction. Knowall was ordered by the
High Court in the Western Cape to pay the sum of R25 million to JB
Construction. The amount was made up of the sum of R5 million being the
remuneration JB Construction paid to Knowall to facilitate and finalise a deal
with Archibald Construction for the disposal of certain assets. Archibald
Construction had in turn paid the sum of R20 million in cash and shares to
Knowall for secretly acting on its behalf.
Based on the above information, and quoting legislationthe Companies Act,
2008, common law, and Companies Rregulations, 2011, common law, and
precedent in support of your opinion:



Defend the High Courts decision to hold Knowall liable to pay the sum
of R25 million to JB Construction.


Explain the need for directors appointed as nominees or shareholder

representatives to act in the best interests of the company rather than
in the interests of the person who has appointed them.


[25 marks]

Corporate Secretaryship

October 2014

Page 3 of 9

Read the scenario and answer the questions.
You are the Company Secretary of Think Big Energy Technologies Limited,
a company listed on the JSE Limited. The company is in the business of
providing resources and technology for the provision of resources for
electricity generation in South Africa. PB Energy Limited, a company
incorporated in India, providing coal and hydroelectric power and fuel cell
technology in India, has acquired the major shareholding in Think Big with a
view to expanding operations into Africa.
At the time of the acquisition by PB Energy the board was as follows:

Mrs P Morake, Chairman; independent non-executive director

Mr A Goldstein, Chief executive officer; executive director
Ms J Joubert, Chief financial officer; executive director
Ms F Patel, independent non-executive director
Mr l Minnie, independent non-executive director
Mr J Brown, non-executive director (Mr Brown holds 5% of the shares
of the company.

The two independent non-executive directors, Ms Patel and Mr Minnie, have

resigned, leaving the chairman as the only independent non-executive
director. The Memorandum of Incorporation provides that the board should
consist of at least five directors.
PB Energy have the right to appoint two directors in terms of the sale of
shares agreement and, being new to the South African market, have asked
you to provide guidance on various aspects of SA legislation and regulation
in respect of board and committee appointments.
Prepare a report for the board of PB Energy evaluating the proposals set out
below, supporting your answer with appropriate legislationappropriate
references to the Companies Act, 2008, the Companies Regulations, 2011
and King III Code of Corporate Governance.
2.1 PB Energy is recommending the appointment of Mr R Raj, the Chief
Financial Officer of PB Energy in India, as an independent non-executive
director as well as Mr J Ndlovu, a South African businessman, as their
other independent non-executive director. Mr Ndlovu does not own any
shares and is not associated in any way with either of the two companies.

Corporate Secretaryship

October 2014

Page 4 of 9

2.2 Audit committee members will have to be appointed to the PB Energy

board, and they have suggested the composition be made up as follows:


The chairman of the board, Mrs P Morake, to be appointed chairman

of the audit committee;
Mr Raj, a registered chartered accountant in India, Mr Ndlovu, who
is a chartered accountant in South Africa and Mr Goldstein, the CEO;
Mr Brown, the non-executive director, to retain his position as a
member of the audit committee.
Documents that need to be submitted to finalise the appointments.


[25 marks]

Corporate Secretaryship

October 2014

Page 5 of 9

Read the scenario and answer the questions.
The shareholders of ABC Hotel Holdings (Proprietary) Limited, are made up
as follows:

former employees;
public shareholders, who had been invested in a listed company
acquired by ABC Hotels some years previously and who had accepted
ABC Hotels shares in exchange for their shares in the listed entity;
corporate investors;
financial services providers; and
stock brokers.

ABC Hotels has three hotels in major centres in South Africa and has become
aware of a hotel which is being sold in Bloemfontein. The proposed
acquisition would support the companys strategy to grow the company and
would add considerable value.
The company has been investing part of its profits, after declarations of
dividends, with a view to growing the business and also has approval for a
bank loan which will partially cover the acquisition in Bloemfontein. A further
R100 million will have to be raised in order to finance the acquisition.



The Board of Directors has asked you, the company secretary, to

prepare a report for discussion at its next board meeting about raising
the additional finance by means of a rights offer, outlining the legislative
requirements of the Companies Act pertaining to rights offers; and


Provide a brief outline of what action needs to be taken if the board

approves the proposal.


[25 marks]

Corporate Secretaryship

October 2014

Page 6 of 9

Read the scenario and answer the questions.
Lonaf Investments Limited, has recently merged with Petervale Investments
Limited, both companies being unlisted public companies, resulting in many
changes for Petervale Investments Limited, as agreed in the shareholders
agreement. The changes are as follows:

Petervales financial year end is currently March each year and the
board has suggested that the financial year end be aligned with that of
Lonaf which is at the end of December each year.
Petervale had previously been exempted from forming a Social and
Ethics Committee but may no longer be exempt in terms of Regulation
43 as the merger would most likely result in the company scoring
above 500 Public Interest points. At that stage a social and ethics
committee would have to be formed.
Several changes are required to the Memorandum of Incorporation,
which include a change of Petervales name to Lonaf Africa, and an
increase in the authorised share capital from 500 000 ordinary shares
of no par value to 1 000 000 ordinary shares of no par value.

As company secretary of Lonaf, prepare a paper for inclusion as part of the
agenda at the next board meeting, which will be required by the shareholders,
the board and your department to give effect to:

Change of the financial year end to the end of December each year;



The establishment of a social and ethics committee. Your answer must

include an explanation of the meaning of 500 Public Interest Points and
why such a committee would add value to the company.



The change of name and increase in the share capital of the company.

In each case, advise what action would be required and reference relevant
legislation in support of your recommendations.
[25 marks]

Corporate Secretaryship

October 2014

Page 7 of 9


Read the scenario and answer the questions.

The annual report of Brass Farthing Limited, a company listed on the JSE
Limited, was circulated on the record date which was 25 working days prior
to the holding of the annual general meeting due to be held next week.
Mr Peter Wilson, a shareholder has sent you an e-mail in respect of the
following matters:

Requesting minutes of directors and shareholders meetings;


Alleging that proper notice of the Annual General Meeting has not been
given as he only received the annual report and notice of annual
general meeting that day which was insufficient notice to enable him to
attend the meeting;


Complaining about a resolution to be passed at the annual general

meeting stating that it would interfere with his and other minority
shareholders rights; and


Using strong language and, in referring to the financial statements, and

in particular costs, he has called the CEO and the CFO thieves. He
has stated that he is going to approach the Westerly Gazette, a
newspaper known for its scurrilous publications.




Respond to his request for minutes of the directors and shareholders



Advise him of the requirements for giving of notice of meetings and his
rights for the protection of his and other shareholders interests.


Warn him about publishing information which cannot be substantiated.

[25 marks]

Corporate Secretaryship

October 2014

Page 8 of 9

Read the scenario and answer the questions.
You are employed by Vital Link Registrars, who are the appointed registrars
of numerous listed and private entities. You have been requested to attend
to the transfer of shares from Ms Linda Green, a shareholder of Blue Horizons
(Pty) Limited, who currently holds 50 000 shares in that company. She
wishes to sell 25 000 of these shares to Mr David Hill.

Explain what would be required in order to give effect to the sale and transfer
of the shares from Ms Green to Mr Hill.
[25 marks]
(Total: 100 marks)


Corporate Secretaryship

October 2014

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