Read the scenario and answer the questions that follow: Luxury golf estate in St Francis Bay faces criminal charge for not playing by Companies Act rules Tammy Petersen News 24 | 25 July 2022 The board of directors of the Links Golf Club and the St Francis Links Homeowners Association in St Francis Bay, Eastern Cape have been informed their disclosure certificates were being red flagged for non-compliance, with the CIPC in the process of amending their status as the entities seek legal advice. The agency is also preparing an affidavit to open a criminal case for referral to the National Prosecuting Authority for failing to comply with the Companies Act. St Francis Links was named South Africa's Best Golf Course at the World Golf Awards last year. The gloves are off as the Concerned Homeowners Group ("CHOG"), which laid the complaint with the CIPC in February last year, has drawn the battle lines. After attempting to resolve its concerns with the homeowners' association involving the interpretation of governance documents, the number of shares authorised and in issue regarding Links Golf Club, and AGMs and/or special resolutions proceeding without reaching a quorum, CHOG approached the commission, as their efforts to play amicably came to naught. According to CHOG, the initial documents issued as well as a homeowners' handbook state that the club is governed by its own board of directors, independent from the estate. At the time the complaint was lodged, the same people governed both entities. CHOG charged it had discovered clauses and information in the homeowners' association memorandum of incorporation ("MOI") and other governance documents which could negate their rights. In terms of the golf club, in which each property owner has a share, there are 1600 authorised shares, but according to CHOG, there was no mention of the number of shares in issue according to its MOI. It was then advised by the company secretary that there are 800 shares in issue, although the estate only consists of 553 erven with shares attached at 513 for homeowners and 40 for the developer. Of the estate's 587 erven, 518 are owned by home owners, 25 by the home owner's association and 40 by the developer, Wilson Bayly Holmes Ovcon ("WBHO"). which does not pay levies. The developer has an overriding vote, according to the homeowner's association and golf club's MOI. The MOI will cease at the end of the development period when WBHO gives notice to leave. But there is no sunset clause that confirms when. CHOG claimed the developer was using the additional 247 shares in contravention of the MO/s for quorum figures for meetings, including the AGM and special resolutions. When attempting to raise a special resolution at the previous AGM on the clause appearing on both entities' MOIs, CHOG claims it was told it would require 10% of 800 to raise them and not 10% of 553 , translating to " 10% of 247 people who do not exist" as there are only 553 erven on the estate. The CIPC, following its probe, noted its concern that the MOI of both entities read the same, despite the home owners' association being a non-profit company and the other a public entity. Investigator Unati Motau wrote in her report released in August last year that the crux of the complaint was the board's failure to accommodate a reasonable request for a meeting to provide clarity and transparency on issues of shares, governance documents and AGM quorum in accordance with the Companies Act, which provides procedural requirements for both the requester and the directors. httips://www.news 24.c0m/ news 24/ southafricaews/luxury-golf-estate-faces-criminal-charge-for-notplaying-by-companies-act-rules-20220725 Required 1.1 The scenario above indicates several challenges with the two entities including uncertainty regarding the number of shares in issue, and quorum issues regarding special resolutions and attendance at AGMs. Discuss why the fact that the number of shares in issue is the most significant of these challenges