INTERNATIONAL QUALIFYING BOARD

EXAMINATION
OCTOBER 2013

Corporate Secretaryship

MEMORANDUM

All references to the 2008 Act = The Companies Act

All references to the CC Act = The Close Corporations Act 69 of 1984
All references to King III = King Report on Governance/King Code of Governance
Principles for South Africa 2009
All references to CSSA notes = CSSA Corporate Secretaryship study material
All references to CBA = South African Corporate Business Administration by Juta

QUESTION 1
1.1

CSSA Chapter 1, Page 6

The company secretary plays a central role in the governance and
administration of a companys affairs in particular:
a. Board: Providing practical support to the chairman and directors,
both as a group and individually, ensuring compliance with statutory
and regulatory requirements for the conducting of meetings and
providing access to information that the board may require.
b. Company: Ensuring compliance with applicable statute and
regulations i.e. Companies Act, JSE Regulations if listed.
c. Shareholders: Is the primary point of contact for all shareholders and
organising shareholder related events such as shareholders
meetings, communication in respect of shares, issue of annual report
and financial statements.

1.2

(6)

CSSA Chapter 6, Page 104

All Companies must submit an annual return each year to show the
essential facts about the company for public record.

Failure to submit an annual return can lead to the company being

struck off the Commission.
Only electronic filing of annual returns is accepted by the
Commission.
The annual returns are due and payable on the anniversary of the
incorporation of the company.
Companies which are audited are required to submit a copy of the
latest audited financial statements after payment of the annual duty.
Companies which voluntarily choose to be audited can elect to file
the audited financial statements, independently reviewed financial
statements or a Financial Accountability Statement.
All other companies must file a Financial Accountability Statement.
Details of the annual return are set out in the Annual Return User
Guide and are contained on form CoR30.1.

Annual duties are payable by public companies with a share capital,

external companies with a share capital and private companies.
1.3

(8)

CSSA Chapter 7, Page 131; JSE Regulation 3.4(b)

1.3.1 A trading statement is aimed at alerting investors to a large
variation in operating performance of a company, up or down,
from its previous comparative results.
1.3.2 Regulation 3.4 (b) states as follows:
Companies must publish a trading statement as soon as they
are satisfied to a reasonable degree of certainty that the
financial results for the period to be reported on will differ by a
least 20% from
The financial results of the previous corresponding period;
or
A profit forecast previously provided to the market for such
period.

Corporate Secretaryship Memorandum October 2013

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1.4

Companies may choose to publish a trading statement if the

variation is less than 20% but there is no obligation if the
variation is not significant.

CSSA Chapter 8, Page 153

1.4.1 Laying financial statements means circulating them to
shareholders for consideration at the general meeting;
1.4.2 Lodging financial statements means filing them with the
Commission; and
1.4.3 Publishing financial statements means publishing, issuing,
circulating or otherwise making financial statements available for
public inspection in a manner intended to invite the general public
to read them. This includes SENS in the case of a listed
company.

1.5

(6)

(4)

CSSA Chapter 11, Pages 188 and 218

Section 1 defines a special resolution as one which is passed:
(a) At a shareholders meeting with the support of least 75% of the voting
rights exercised or such lower percentage as the MoI provides
(b) The companys MoI can specify any percentage but there must be
differential provided of at least 10% between support for ordinary and
special resolutions.
(c) By holders of a companys securities acting other than at a meeting.
In other words, when they pass a written resolution.
To amend the Companys MoI;
Ratify a consolidated revision of the Companys MoI;
Ratify actions by the Company or directors in excess of their
authority;
Approve an issue of shares or securities;
Authorise the board to grant financial assistance;
Approve a decision of the board for re-acquisition of shares;
Authorise the basis for compensation to directors of a profit
company;
Approve a voluntary winding up of the Company;
Approve the application to transfer the registration of the company
to a foreign jurisdiction;
Revoke a resolution;
Approve any proposed fundamental transaction; or
Approve any other matter requiring a special resolution in terms of
the MOI. (any two)

1.6

(5)

Companies Act, Sections 36 and 37; CSSA Chapter 13, Page 258
Sections 36 and 37 regulate the inclusion of different classes of shares
and their rights in the MoI. These can include (any 4):

Preference shares carry a preferential right to a fixed dividend and

usually have a higher priority than other classes of shares in windingup;

Corporate Secretaryship Memorandum October 2013

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Ordinary shares rank after preference shares for the purposes of

dividends and return of capital but carry voting rights not given to
holders of preference shares;
Redeemable preference shares may be redeemed at a set price at a
future date;
Convertible preference shares provide the company at a future date
to convert the shares to ordinary shares;
Participating preference shares are guaranteed a fixed dividend at
the first allocation and thereafter join the queue to rank equally with
ordinary shareholders;
Deferred shares carry few rights as their rights are deferred to
ordinary shares and usually only participate in profits once the
ordinary shares have been paid a predetermined dividend.
(8)

1.7

CSSA Chapter 9, Page 169

The members of a company having share capital are the shareholders ,

and are in fact the owners of the company.
Stakeholders include shareholders but also include other groups with an
interest in a company e.g. employees, families of employees, customers,
surrounding communities, investors, suppliers and directors.

(3)

[Total 40 marks]

Corporate Secretaryship Memorandum October 2013

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QUESTION 2
Companies Act, sections 4 and 46; CSSA Chapter 15, Page 293
BEST PRACTICE
The board must initially address the recommendations set out in the Companys
Dividend Distribution Policy which should have been approved by the Audit
Committee and the Board.
The Memorandum of Incorporation must be consulted to ensure that the rights
of different classes of shareholders would be met.
A distribution is declared and paid at the directors discretion as set out in the
Memorandum of Incorporation.
Once the distribution has been declared it becomes a debt due by the company.

(6)

LEGISLATION
Sections 4 and 46 of the Companies Act set out the requirements for the
declaration of a dividend and are set out briefly below:
Section 46 distributions must be authorised by the board

The board is required to pass a resolution authorising the distribution;

The board must be sure that it reasonably appears that the company will
satisfy the solvency and liquidity test immediately after completing the
proposed distribution;
The board is required to pass a resolution to the effect that it has applied the
solvency and liquidity test and that the company will satisfy the solvency and
liquidity test immediately after completing the proposed distribution;
Once the board has approved the resolution, then the distribution can be
carried out, following a timetable that has to be approved by the JSE in
respect of listed companies.

(5)

Section 4 Solvency and liquidity test

A company satisfies the solvency and liquidity test at a particular time, if
considering all reasonably foreseeable financial circumstances of the company
at that time:

The assets of the company/group, as fairly valued, equal or exceed the

liabilities of the company
It appears that the company will be able to pay its debts as they become due
in the ordinary course of business for a period of 12 months after the date of
the test/distribution

Corporate Secretaryship Memorandum October 2013

(5)

Page 5 of 11

JSE REGULATIONS 3.11 to 3.14

The listings requirements of the JSE emphasise the price sensitivity of dividend
declarations and it is essential that an immediate publication of the decision with
the regard to dividends be announced on SENS (stock exchange news service)
and the press as soon as possible. The timing of the declaration and payment of
the dividend is also approved by the JSE.

(3)

Discretionary mark for memo format.

(1)
[20 marks]

Corporate Secretaryship Memorandum October 2013

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QUESTION 3
3.1

CSSA Chapter 2, Page 39

Obtain a written resignation from Mr Dlamini which contains the

effective date of the resignation.
Write a letter to Mrs Mogotsi requesting personal details which have
to be included on the CoR39 (Return for the change of directors
details) i.e.
Full names
Residential address
Business address
Postal address
Date of birth/ID number
Nationality
Business occupation
Obtain specimen signature if the director will sign cheques on the
companys behalf

Inform the director of the obligation to disclose any interests in the

shares or debentures of the company and the need to provide all
information in this regard.

Obtain banking account details for the payment of directors fees

Send a copy of latest annual report, Memorandum of

Incorporation and meeting plan
Inform the director of the need to undergo a directors induction
programme and arrangements in respect of the programme.

3.2.1

Board resolution to be passed accepting the resignation and

approving the appointment.
Prepare the CoR39 and send it to the Commission (CIPC) within 10
business days of the change in the composition of the board.

(10)

Companies Act, sections 128 137; CSSA Chapter 17, Pages 324
and 325
Memo format
The procedure to be followed:

The board must conclude that the company is in distress and

pass a resolution to place the company in business rescue;
Within 5 days of resolution the company must appoint a business
rescue practitioner and publish a notice in the press;
A form CoR 123.1, notice to start business rescue proceedings
must be filed with the Commissioner/CIPC;
A form CoR 123.2, notice to appoint a business rescue
practitioner, must be filed with the Commissioner/CIPC;
Business rescue practitioner commences his task and may
remove existing directors;

Corporate Secretaryship Memorandum October 2013

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Proceedings end when a court sets aside a resolution or order

that began the proceedings, when:
The practitioner has successfully completed his job, or
Converts the business rescue into liquidation proceedings
because the practitioner could not turn the business
around;
Business practitioner then files either of the following forms:
CoR 125.2, notice of termination of business rescue
proceedings , or
CoR 125.3, notice of substantial implementation of a
business rescue plan.

(10)

[20 marks]

Corporate Secretaryship Memorandum October 2013

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QUESTION 4
Companies Act, Section 45; CSSA Chapter 2, pages 53 and 54
Memo format
Section 45 sets out the requirements for the granting of financial assistance to
directors, which includes lending money, guaranteeing a loan, securing any debt
or obligation
Does not include:

Lending of money in the ordinary course of business by a company

whose primary business is the lending of money;
An accountable advance to meet legal expenses in relation to a matter
concerning the company or an amount to defray the persons expenses
for removal the companys request.

Unless the Memorandum of Incorporation of the company provides otherwise,

the board may authorise the company provide direct or indirect financial
assistance to the director.
The company may however, not authorise any financial assistance unless it is:

In respect of an employee share scheme;

Has been approved by a resolution of shareholders which has been
passed during the past two years;
The board is satisfied that immediately after providing the financial
assistance, the company would satisfy the solvency and liquidity test.

Recommendation to Mr Mann
The Companys memorandum of incorporation makes allowance for the
granting of loans to directors subject to the Companies Act.
The board must ensure that there is shareholder approval in place to grant
loans to directors. Such approval cannot be older than two years.
The Companies Act is specific that a loan may not be given to a director, if the
giving of such a loan would result in the company passing the solvency and
liquidity test and that the terms of the loan should be fair and reasonable to the
Company.
Due to the Companys marginal profits over the past two years the Board of
Directors must apply the solvency and liquidity test with diligence prior to the
granting of the loan.
Should the board adopt a resolution to give the requested financial assistance,
the following action would be required in terms of section 45:

The board must give written notice of the resolution to grant the loan to
shareholders of the company, as well as the trade union representing
employees, with 10 days of the passing of the resolution or within 30
business days after the end of the financial year.
[20 marks]

Corporate Secretaryship Memorandum October 2013

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QUESTION 5
Companies Act, Chapter 2 and Regulation 12; CSSA Chapter 4, Pages 84
to 87
1. Apply to the Commission for the reservation of the proposed new name by
the submission of form CoR9.1 electronically. A filing fee of R50.00 is
payable.
2. Following confirmation by the Commission that the name is available, the
board will resolve to propose to shareholders that the name will be
changed.
3. The Company will issue an explanatory notice stating as follows:

What is exactly being proposed by the directors;

Why (the reason) the directors are making the proposal;

The consequences if the shareholders accept the proposal;

The consequence if the shareholders reject the proposal;

Effective date of the change if accepted.

4. The board will propose to either hold a formal meeting of shareholders, or
agree that the change can be effected by written resolution without the need
to hold a formal meeting.
5. Should the board propose the holding of a formal meeting, the following
would be the timetable:

Record date to establish the identity of the shareholders to whom

notices shall be sent;

Notice to be prepared by company secretary and despatched to

shareholders;

Shareholders can either arrange for submission of a proxy or attend

the meeting in person or electronically;

The special resolution to make the necessary change to the

Memorandum of Incorporation and change of name of the company
must be passed with the required majority (as set out in the MOI) or
75% of the voting rights exercised.
6. Should the board propose that a written resolution be passed the procedure
would be as follows:

Notice to be prepared by company secretary setting out:

What is expected of shareholders if they consent;
What shareholders should do if they require more information;

What shareholders must do if they disagree;

The deadline for return of the resolution.

Company Secretary to monitor responses to establish whether the

required majority is received;

Notify the board of success or failure;

If passed, paste the resolution in the minute book

7. Submit CoR 15.2 (Notice of Amendment of Memorandum of Incorporation)
to be submitted to CIPC together with the fee of R250.00.
[20 marks]

Corporate Secretaryship Memorandum October 2013

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QUESTION 6
Name of Company
Incorporated in the Republic of South Africa
Registered Address:
3rd Floor Ocean View Building
1 Strand Street
EAST LONDON 5201
NOTICE OF GENERAL MEETING OF SHAREHOLDERS
Notice is hereby given that a general meeting of shareholders will be held at
(address) on (day, date and time) for the purpose of considering, and if thought fit,
passing the following resolution as a special resolution in the manner as required by
the Companies Act, 2008:
That Article 2.1 of the companys Memorandum of Incorporation which presently
reads:
The company is authorised to issue no more than 1 000 000 (one million) ordinary
shares of no par value
to be deleted and replaced with a new Article 2.1 which will read as follows:
The company is authorised to issue no more than 2 000 000 (two million)
ordinary shares of no par value
The reason for this change is to increase the amount of shares that can be issued
from 1 000 000 to 2 000 000 no par value shares.
The effect of the resolution, if passed, will be to allow the directors to issue up to
2 000 000 no par value shares.
Any shareholder who is unable to be personally present at the meeting shall be
entitled to:

Appoint a proxy or proxies to attend, speak and, on a poll, to vote in their

stead.
Make arrangements with the company secretary to attend the meeting via a
telephone conference call.

In order to exercise either of these rights the registered shareholder must complete
the attached form of proxy and return to the company so that it is received by no
later than (time) (day) and (date). Shareholders who will be attending must provide
the telephone number on which they can be reached and will be provided with a
secure PIN number to log in as proof of entitlement to attend the meeting and vote
thereat.
By Order of the Board
A James
Company Secretary
Record date and date of issue of notice: (Date)
[20 marks]
[Total: 100 marks]

END OF MEMORANDUM
Corporate Secretaryship Memorandum October 2013

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