3.1 Brawny Drills Ltd and Power Tools Ltd both specialise in drilling devices. They wish to combine their businesses, by entering into a transaction in terms of which the entire assets and liabilities of both of these companies will vest in a newly formed company called Newco Ltd automatically by operation of law. Both Brawny Drills Ltd and Power Tools Ltd will cease to exist, pursuant to the transaction. With reference to the relevant statutory provisions and the facts provided, advise Brawny Drills Ltd and Power Tools Ltd on the following matters:

3.1.1 The type of transaction that is proposed in the scenario above. (2)

3.1.2 The approval and procedural requirements that must be complied with in order to give effect to the proposed transaction. (8)

3.2 Assume for the purpose of question 3.1 above that, as a result of manufacturing defects in the drills of Brawny Drills Ltd, serious injury has been caused to users of these drills. A few days before the implementation of the above transaction, legal proceedings were initiated against Brawny Drills Ltd for delictual liability. At the time of entering into the above transaction, Power Tools Ltd was unaware of this potential liability of Brawny Drills Ltd. Discuss the impact of the above transaction on both the liability of Brawny Drills Ltd and the legal proceedings against it. (5)