CIS INTERNATIONAL QUALIFYING

BOARD EXAMINATION
MAY 2012

Corporate Secretaryship

MEMORANDUM

All references to the Act = The Companies Act 71 of 2008

All references to ICSA notes = ICSA Corporate Secretaryship study material
All references to CBA = South African Corporate Business Administration by Juta

QUESTION 1
1.1

(King Report)

Any of the following for 5 marks

Determine whether the evaluation process will be done in-house or

by an independent service provider.
Assist with determining, role, function, duties and performance
criteria of Board.
Should be done annually therefore determine the timeframe.
Results of evaluation should determine training needs.
An overview of the process, results and actions must be disclosed in
the integrated report.
Assist chairman with individual Board member performance that will
determine re-appointment.

(5)

1.2 (King Report)

Any of the following for 8 marks

Audit committees should consist of at least three members.

All members should be independent non-executive directors.
Is not a representative of a shareholder who has the ability to control
or significantly influence management.
Does not have a material direct or indirect interest in company
/group which: (a) is greater than 5% of the groups total number of
shares in issue (b) is less than 5% of the groups total number of
shares in issue, but is material to his/her personal wealth.
Has not been employed by the company or the group of which
he/she currently forms part in any executive capacity for the
preceding three financial years.
Is not a member of the immediate family of an individual who is or
has been in any past three financial years, employed by the group,
in an executive capacity.
Is not a professional advisor to the company or to the group, other
than as a director.
Is free from any business or other relationship which could be seen
to interfere materially with the individuals capacity to act in an
independent manner; and
Does not receive remuneration contingent upon company
performance.
Chairman of the Board should not be the Chairman of the
Remuneration Committee.
Must comprise of only board members.
Should be chaired by a Non-Executive director.

Corporate Secretaryship

Memorandum May 2012

(8)

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1.3 (King Report)

Any of the following for 7 marks.

A summary of the role of the Audit Committee.

A statement on whether or not the Audit Committee has adopted a
formal terms of Reference that have been approved by the Board
and if so, whether the Committee satisfied its responsibility for the
year in compliance with its terms of reference.
The names and qualifications of all the members of the audit
committee during the period under review and the period for which
they served on the committee.
The number of audit committee meetings held during the period
under review and members attendance at these meetings.
A statement on whether or not the audit committee considered and
recommended the internal audit charter for approval by the board.
A description of the working relationship with the chief audit
executive.
Information about any other responsibilities assigned to the audit
committee by the board.
A statement on whether the audit committee complied with its legal,
regulatory or other responsibilities.
A statement on whether or not the audit committee recommended
the integrated report to the Board for approval.

(7)

1.4 (Companies Act)

Any 3 of the following for 3 marks

Register companies, co-operatives and intellectual property rights

and maintain such register;
Disclose information on its register;
Promote education about, and awareness of, company and
intellectual property law;
Promote compliance with the relevant legislation;
Ensure the efficient and effective enforcement of relevant legislation;
Monitor compliance with and contraventions of financial reporting
standards, and make recommendations i n this regard.

(3)

1.5 (Companies Act)

Special Resolution 75%

Ordinary resolution 51% (also accepted 50+1 or more than 50%)
The MOI can alter these percentages
Not lower than 65% for special resolution
Not higher than 60% for ordinary resolution

Must be margin of at least 10% or more between an ordinary and

special resolution

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Notice period is 15 business days for public companies and 10

business days for private companies

(7)

1.6 (King III)

Any of the following with a proper motivation for 5 marks

Risk
Compliance, Governance, Litigation
Sustainability
ICT Steering Committee
Health and Safety
Business Continuity Management
Transformation
Ethics
Internal Audit
External Audit

(5)

1.7 (Companies Act, King III)

Will be applied for

Reduction of share capital

Financial assistance for share purchase in itself

Dividends

Other compensations
Solvency test the assets of the company, fairly valued, equal or exceed
the liabilities of the company.
Liquidity test the company will be able to pay its debts as they become
due in the ordinary course of business for a period of twelve months after
the date of the test.
The Solvency and liquidity test in a group structure is applicable only to the
individual company and not to the group as a whole.

(5)

[40 marks]

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QUESTION 2 (Companies Act, King III)

2.1

Any the following 13 points properly explained for 13 marks

(one mark per point)

The Board should be assisted by a competent, suitably qualified and

experienced company secretary.
Has a pivotal role to play in the corporate governance of a company.
Appointment and removal is a matter for the board.
Board should be cognisant of the duties imposed upon the company
secretary and should empower the individual to enable proper
fulfilment.
Gatekeeper of good governance important to maintain an arms
length relationship as far as possible.
Should assist in nominations committee and ensure that the
procedure for the appointment of directors are properly carried out.
Should assist in the proper induction, orientation and development
of directors, including assessing the specific training needs of
directors and executive management in their fiduciary and other
governance responsibilities.
Individual directors and board will look to the company secretary for
guidance on their responsibilities and duties and how such duties
should be properly discharged in the best interest of the company.
Central source of guidance and advise to the board and within the
company on matters of ethics and good governance and changes in
legislation.
Should have a direct channel of communication to the chairman and
should be available to provide comprehensive practical support and
guidance to directors with emphasis on supporting the NEDs;
chairman and committee chairmen.
Should ensure that the Board charter and committee terms of
reference are kept up to date.
Ensure proper compilation and timely circulation of board packs and
assist chairman with drafting of annual work plans.
Obtain appropriate responses and feedback to specific agenda
items and matters arising from earlier meetings. Raise matters that
may warrant the attention of the Board.
Ensure proceedings of board and committee meetings are properly
recorded and that approve a minutes are circulated in a timely
manner
Assist the Board with annual board and individual director
evaluation.
Formulate, with CEO and Chairman, annual board work plan against
agreed objectives.
Chairman should meet with CEO and company secretary before
board meeting to agree on agenda and discuss important issues.
Consult with Committee chairman on agenda for committee
meetings.

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Assist in drafting of annual report (governance section,) notice of

AGM and proxy.
Also accepted should preferable not be a director
Have an arms length relationship with the board and other relevant
parties.

2.2

Any of the following for 7 marks

(One mark per point)

Has been declared delinquent by a court.

A juristic person.
Unemancipated minor.
Unrehabilitated insolvent.
Prohibited by public regulation.
Removed from office of trust due to dishonesty.
Convicted of a crime of dishonesty such as theft, fraud etc, without
the option of a fine.
Does not meet the requirements set out in the companys MOI.

(13)

(7)

[20 marks]

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QUESTION 3 (Companies Act)

The following processes to be covered in the required details

Amendment of MoI.
Obtain JSE approval to proceed.
Shareholders meeting and resolutions.
Dealing with issues of letters of allotment.
Receipt of acceptances.
Bank account issues including receipts, reconciliations.
Minimum subscription, shortfall in take up.
Splits renunciations.
Board meeting to allot new shares and decision on fractions.
JSE listing.
Share transfer secretary procedures updating of registers.
Advising shareholders of successful acceptances.
[20 marks]

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QUESTION 4 (Companies Act section 76 (3)

4.1

4.2

4.3

Memorandum format

A director of the company, when acting in that capacity must

exercise the powers and perform the functions of a director
(a) in good faith and for a proper purpose
(b) in the best interest of the company and
(c) with a degree of care skill and diligence that may be
reasonable expected of a person
(i) carrying out the same function in relation to the
company as those carried out by that director and
(ii) having the general knowledge, skill and experience
of that director.

In terms of section 75(6) if a director of a company acquires a

personal financial interest in an agreement or other matter in
which the company has a material interest, after the
agreement or matter has been approved by the company, the
director must promptly disclose to the board the nature and
extent of that interest and the material circumstances relating
to the director is acquisition of that interest.

(7)

Section 71

Despite anything to the contrary in the MOI or agreement

between a company and a director or between any
shareholders and a director, a director may be removed by
an ordinary resolution of shareholders entitled to vote or by
board meeting
The director concerned must be given notice of the meeting

and the resolution, similar to which a shareholder is entitled

to receive
The director must be given an opportunity to be heard at the

meeting before the vote on removal is put to the meeting

The removed director has the right to apply to court for

damages for or loss of office

In terms of section 160 a shareholder may apply to court for

an order declaring a person delinquent or under probation

(6)

Any of the following for 7 marks ( One mark per Point )

The Board should ensure that the companys ethics are managed
effectively by ensuring that

It builds and sustains an ethical corporate culture in the

company

It determines the ethical standards which should be clearly

articulated and ensures that the company takes measures to
achieve adherence to them in all aspects of the business.

Adherence to these ethical standards is measured

Internal and external ethics performance is aligned around

the same ethical standards

Ethical risks and opportunities are incorporated in the risk

management process

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A code of conduct and ethics related policies are

implemented
Compliance with the code of conduct is integrated in the
operations of the company
The companys ethics performance should be assessed,
monitored, reported and disclosed
A dedicated person to be assigned to be the custodian and
ethics officer to the company. This should be a person of
undoubted integrity.

(7)

[20 marks]

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QUESTION 5
To be covered:

Getting up to date financial statements prepared indicating current

financial position

Compiling a list of creditors. Names, detailed amounts, payment

terms

Communication with creditors. Detailed communication indicating

rational for the proposal/ resolution by the Board, the effect on
creditors claims and the process to be followed.

Lobbying large creditors for their support with regard to the

proposal. This is important to ensure shareholders and creditors are
aligned and that the shareholders meeting will be successful.

Convening a meeting of creditors.

Ensuring compliance with requirements for quorum and majority

vote at shareholders meeting. The quorum for all resolutions is 25%
of the voting shares.

Board meeting to obtain authority to convene a shareholders

meeting. Ensure majority of the Board is present at the meeting to
pass the resolution.

Special resolutions requirements. Notice period is 15 business days

for public companies and 10 business days for private companies.
The majority for special resolution is 75% of shares voted.

Recalling old share certificates for cancellation and re-issue in new

par value.

Dealing with shareholders who fail to send share certificates for

replacement.
[20 marks]

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QUESTION 6
6.1

6.2

Under the Companies Act 2008 smaller businesses will no longer

automatically be subject to strict financial reporting and auditing
requirements. This allows companies with characteristics very
similar to those of close corporations to be formed. In effect it means
there will be no further need for close corporations. The Companies
Act 2008 provides for the indefinite continued existence of the Close
Corporations Act, 1984, but provides for the closing of that Act as an
avenue for incorporation of new entities or for the conversion of
companies into close corporations as of the effective date of the Act
namely 1 May 2011.

(4)

Close Corporations retain their current status until such time as their
members may determine that it is in their interest to convert to a
company.
The process to convert is:

6.3

Filing form CoR 18.1

No filing fee will be applicable if the Close Corporation
converts to a company within three years of the effective date
of implementation of the Companies Act, but retains the
same name.
Forms to be submitted with filing are:
1. Written statement of 75% of the consenting members
interest to convert
2. Memorandum of Incorporation
3. Applicable fee.

The Commissioner can either accept conversion or request further

information from the Close Corporation to verify that requirements
have been met - form CoR 18.2.

(8)

Existing CCs will be treated as private companies and the Close

Corporation Act will be brought into line with legislation on private
companies. The Companies Act 2008 provides for the indefinite
continued existence of the Close Corporations Act
Every member of the close corporation converted is entitled to
become a shareholder of the company resulting from that
conversion.
Shares to be held in the company individually need not necessarily
to be in proportion to the members interest as stated in the founding
statement of that close corporation.
The juristic person that existed as a CC before the conversion
continues to exist as a juristic person, but in the form of a company.
All the assets, liabilities, rights and obligations of the CC vest in the
company.

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Any legal proceeding instituted before by or against the corporation

may be continued by or against the company.
Any liability of a member of the corporation for the corporations
debts that had arisen in term of the Close Corporation Act and
existed immediately before the conversion continues as a liability of
that person, as if the conversion had not happened.

(8)

[20 marks]

END OF MEMORANDUM

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