QUESTION 1

Themba, who was a manager of the Men's Club, approached the Commission for Conciliation, Mediation and Arbitration (the CCMA) seeking severance pay after he was retrenched. The trade union Themba belongs to was informed that he was not employed by the Men's Club, but in fact by a close corporation named Bad Boys CC. The trade union duly cited Bad Boys CC as the respondent in a referral to the CCMA. During conciliation, Tendai Munyai, who is the sole member of Bad Boys CC, indicated that the Men's Club was insolvent and that Themba had been dismissed for operational reasons. The commissioner advised Themba to refer an unfair dismissal dispute for resolution. When the matter was referred for arbitration, both the Men's Club and Bad Boys CC were cited as respondents. After hearing the matter, the commissioner ordered Bad Boys CC to pay Themba an amount of R250 000 for his unfair dismissal. However, it was discovered that Bad Boys CC had no assets. In fact, Tendai Munyai, who also participated in the running of the business, had provided a loan to Bad Boys CC and he had secured claims against the close corporation for repayment of the loan amounts. Themba intends to seek an order from the Labour Court to the effect that Tendai Munyai was his true employer and that he must pay him the amount of R250 000. With reference to the relevant provisions of the Close Corporations Act 69 of 1984 and case law, indicate what Themba would have to prove in order to hold Tendai Munyai personally liable to pay him the amount of R250 000. (12 Marks)

QUESTION 2

Phiwe is one of the shareholders of GEP Fund Ltd. GEP Fund Ltd is a subsidiary of Global Investments Ltd. Global Investments Ltd has both an audit committee and a social and ethics committee. With reference to the Companies Act 71 of 2008, advise Phiwe on the types of companies that must appoint an audit committee and explain whether GEP Ltd must appoint an audit committee. (10 Marks)

QUESTION 3

The Memorandum of Incorporation of Pure Gold Ltd ('the company') provides that only the board of directors, or any director authorised by the board, has the power to conclude contracts on behalf of the company. It also states that any transaction that exceeds R50 million must first be authorised by the shareholders by way of an ordinary resolution. Maki, a director who is authorised by the board of directors to conclude contracts on behalf of the company, enters into a contract with Judith for the purchase of gold processing equipment to the value of R100 million, without first obtaining authorisation for the purchase by the shareholders.

Judith knows about the provision in the Memorandum of Incorporation because she has dealt with the company before. However, she does not know that the transaction has not been authorised by an ordinary resolution of the company's shareholders.

3.1 Discuss whether Pure Gold Ltd is bound by the contract concluded by Maki and Judith. (20)

3.2 Suppose that after seven years the board of directors of Pure Gold Ltd has withdrawn Maki's authority to conclude contracts on behalf of the company by way of a board resolution and by amending the Memorandum of lncorporation of the company. However, the board of directors has allowed Maki to conclude contracts on behalf of Pure Gold Ltd with Judith. One day, the board of directors suddenly argues that Maki is not authorised to conclude contracts on behalf of the company and that a contract concluded with Judith is invalid. With reference to the relevant authority and the facts, advise Judith on what she must prove in order to hold Pure Gold Ltd bound by the contract. (20 Marks)

QUESTION 4

Molefe is an experienced quantity surveyor and he has extensive knowledge of the valuation of immovable property. He is approached to serve as a director of New House Properties (Pty) Ltd, a small company that deals in property speculation. Molefe agrees to serve as a director on the understanding that he will only contribute his knowledge of valuation and that he will not be involved with the day-to-day running of the company. Two years pass and Molefe has made significant contributions to the company in terms of property advice, but only when he has been asked to value a specific property. Molefe has never attended a formal board meeting during the two-year period and trusts the rest of the board with all other decisions. Molefe is informed by the managing director that it was decided at the previous evening's board meeting that they should invest in a new property development. This development is in a rural area and Molefe warns that the potential for losses is always higher in such areas. However, the managing director insists that they must act swiftly otherwise the opportunity to invest may be lost. Molefe agrees that the company should take the risk and New House Properties (Pty) Ltd invests in the property development. After six months it becomes clear that the development is a failure. The loss incurred by the company is in the region of R4 million.

4.1 Molefe approaches you for legal advice because some of the shareholders want to take legal action on behalf of the company against the directors for breach of their duty of care and skill. Advise Molefe on the provisions of the Companies Act 71 of 2008 that the shareholders would rely on to hold him liable for breach of his duty of care, skill and diligence and for repayment of the loss suffered by New House Properties (Pty) Ltd. (10 Marks)

4.2 Molefe argues that he cannot be held liable for the loss suffered by the company because when he supported the decision to invest in the new property development he had relied on information that was obtained from others. He also argues that there should be a defence available to him as he was only appointed as a non-executive director and he had supported the decision in good faith. Explain whether the arguments raised by Molefe can be used in his defence to avoid liability. (30 Marks)

QUESTION 5

Bouwer Inc specialises in providing project and construction management services. The company's registered office is situated in Pretoria, in the Gauteng Province. Riaan, Charles, Aubrey and William are the directors of Bouwer Inc. To ensure that the company does not deviate from its core business of providing project and construction management services, the following clauses were inserted into the Memorandum of Incorporation:

"Capacity

The company may not participate in any trades or transactions other than for purposes of the provision of project and construction management services.

The company may not enter any transaction for the purchase or sale of any immovable property outside the borders of the Gauteng Province.

Bouwer Inc has a substantial amount of cash in its bank account which does not yield much interest as a result of the low interest rate that Bouwer Inc's bank offers. While on holiday in Port Elizabeth, in the Eastern Cape Province, William spotted a beach house for sale and thought it would be a great investment for Bouwer Inc. Without the knowledge of the shareholders and directors, William immediately arranged an appointment with the owner of the beach house, Mr Pietersen, and concluded a contract for the purchase and sale of the beach house at a price of R800 000 on behalf of Bouwer Inc. When William arrives back at the office and informs the other directors about the transaction they are not impressed. Advise the board of directors of Bouwer Inc whether the company can escape liability for performance in terms of the contract on the ground that the transaction falls beyond the capacity of the company.(12 Marks)

QUESTION 6

Cool Coals (Pty) Ltd, whichoperates within a community with a high unemployment rate, made three times the usual profit at the end of 2020. The board of directors of Cool Coals (Pty) Ltd is considering whether the company should issue university bursaries to learners from the community who have completed grade 12 in 2020. Some of the directors are opposed to this idea. They claim that the company should be managed exclusively in the interests of the shareholders with the result that: (a) the interests of other stakeholders such as the community and its grade 12 learners cannot be taken into account; and (b) all the profits of the companymust be distributed to the shareholders of Cool Coals (Pty) Ltd. As the company secretary, the board of the company approaches you for advice. With reference to the principle of Ubuntu as expressed by Madala J in the case of S v Makwanyane 1995 (6) BCLR 665 (CC) and the facts in the scenario above, advise the board of Cool Coals (Pty) Ltd on whether the payment of university bursaries may be justified on the basis of the principle of Ubuntu, or whether the profits of the company should be distributed exclusively to its shareholders. (12 Marks)

QUESTION 7

Briefly outline the procedure that must be followed to register a private company in terms of the Companies Act 71 of 2008. (10 Marks)

QUESTION 8

Lesedi and Siphiwe are the only members of Private Investigators CC. Upon formation of the corporation they agreed that their respective membership contributions will consist of cash only. Each member was required to contribute R100 000 and this was duly recorded in the founding statement. Apart from the monetary contribution, Lesedi also entered into a lease agreement in terms of which he is renting out a building he privately owns to Private Investigators CC for use as an office. Siphiwe, who is a part-time student at UNISA, also entered into an employment contract with Private Investigators CC. In terms of the employment contract, he is required to be in the office to attend to the corporation's day-today business. At a meeting of the members, Lesedi and Siphiwe decide that due to a lack of profits generated from sales, Private Investigators CC will repay each member 2% of their respective contributions to enable them to provide for personal needs. They further agree that Private Investigators CC will make some payments to them in terms of their respective rental and employment contracts. Advise Lesedi and Siphiwe whether these payments meet the requirements in terms of the Close Corporations Act 69 of 1984. (10 Marks)

QUESTION 10

With reference to the Close Corporations Act 69 of 1984 and the relevant case law, briefly discuss the scope of discretion that a court has in making an order to assist a member whose rights are unfairly and prejudicially affected by a close corporation's conduct or by the conduct of one or more of the other members of the close corporation.