QUESTION 1

Waste-to-Energy Ltd is a public company specialising in waste management. The board of directors of Waste-to-Energy consists of Peter, Andrew, Mary, Susan and John who is a specialist in waste management. In 2019, the board of directors of Waste-to-Energy Ltd resolved to purchase 1million shares in Truckful Ltd a company specialising in earth moving equipment to improve their supply chain. Unknown to the other directors of Waste-to-Energy Ltd, Andrew is a substantial shareholder in Truckful Ltd.

Watershed City Council approached John with a lucrative offer to develop and implement its waste management system. John hastily resigned from the board of directors of Waste-to Energy Ltd and formed his own company Systems (Pvt) Ltd for that purpose. He enters into a contract with Watershed City Council on behalf of the company he eventually registered. The company formed by John, on registration ratifies the contract and quickly starts to perform the contract.

It is discovered that prior to leaving Waste-to-Energy Ltd, John had purchased five (5) trucks at a cost above market value. John had been tasked by the board to initiate and conclude the purchase of the trucks. This was to be done in conjunction with the CEO.

REQUIRED

As company secretary, you have been requested by the board to present a position paper concerning the activities of the two directors Andrew and John. Advise accordingly.