Question
Miss Dizzy set up the construction company, Scoop RF (Pty) Ltd, with her three friends, Bob the Builder, Farmer Pickles and Sandy Beach. It was
Miss Dizzy set up the construction company, Scoop RF (Pty) Ltd, with her three friends, Bob the Builder, Farmer Pickles and Sandy Beach. It was agreed that, while each of her friends would serve as directors on the board, Miss Dizzy would be appointed as the company secretary. The four would then share equally in profits by each holding one hundred (100) shares in the company. The relevant clauses of Scoop RF (Pty) Ltd's Memorandum of Incorporation are as follows: Article 2.1 'The company has capacity only to enter into contracts that are within the scope of, or ancillary to, its sole business, which is the building, repair and maintenance of structures on immovable property.' Article 2.2 'The board may not conclude any supply contract for materials in excess of R50,000 without having first obtained unanimous consent from the shareholders. Article 2.3 'No provision of in Article 2 may be amended without a unanimous shareholders resolution.' Recently, the board has approved two transactions that are of concern to Miss Dizzy: the first was the purchase of an interest in a farming company managed by the Ndlovu Family Trust, which was on the recommendation of Farmer Pickles with a view to diversifying the company's business; and the second was a contract with Roly Ltd to supply R90,000 worth of bricks for a building tender that Scoop (Pty) Ltd had just been awarded. She raises her concerns, and this annoys Bob the Builder and Farmer Pickles. Sandy Beach does not often attend board meetings and is very easily influenced by the other two directors. 1. What is wrong with the decision taken to purchase the interest in the Ndlovu Family Trust, what is the effect of this on the transaction (internally and externally), and what remedies might Miss Dizzy have as a shareholder of Scoop (Pty) Ltd? 2. Would the contract concluded with Roly Ltd would be binding on Scoop RF (Pty) Ltd?
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