The Medico group, through Medico Investments (Pty) Ltd (Medico), and a medical insurance company, Medi-Insure Ltd (Medi-Insure) embarked on a joint venture to establish a hospital using a dormant company, Dormo (Pty) Ltd.

You are given the following information: 1. The main business of Medico Investments (Pty) Ltd is the establishment and management of hospitals while Medi-Insure Ltd is a financial services group, that, inter alia, offers medical insurance. 2. Medico and Medi-insure concluded a shareholders' agreement which recorded that Dormo was formed to operating a hospital, known as the Medico Medical Institute. 3. The shareholding in Dormo is as follows: 74 percent is held by Medico and 26 percent by Medi-Insurance. Medico accordingly subscribed for 444 shares and Medi-Insurance subscribed for 156 shares. 4. Medico and Medi-Insurance provided security up to maximum of R6 million, in proportion to their respective shareholdings in Dormo, to finance the medical and hospital equipment. 5. Medi-Insure lent R1 million to Dormo on loan account, with interest accruing at an interest rate of prime rate plus 2%. The capital amount and the interest will be repaid when the board of directors of Dormo resolve that sufficient funds, which is in excess of amounts required for its business purpose, is available. 6. If there are further funds required by Dormo for its working capital and medical equipment, Medico and Medi-Insure will, will by agreement, provide the necessary security for those funds, in proportion to their respective shareholding in the company. 7. Medi-Insure being a medical aid and medical insurance company provides an exclusive pipeline of patients to Dormo. 8. Dormo leases the hospital building from Medico.

Medi-Insure and Medico had met their obligations and established the hospital but the cost of establishing and conducting the hospital is proving challenging and further funding is required for, inter alia, the advance payment of drugs and working capital. They have approached some financial institutions for funding and these potential financiers had indicated that they require 50% "good security", classified as being easily realisable assets such as debtors, property or investments. The pledge and cession of shares, personal guarantees etc.is considered as "less good security". One of the proposals for security is the cession of Dormo's income stream to Medi-Insurance who in turn would cede an insurance policy with a surrender value equal to 80% of the debtors book plus its security commitment in terms of the shareholders agreement to the relevant financier. They advise you that they have been informed that another proposal for the financing of the hospital is to approach an identified private investor fund to invest in the hospital and to consider issuing convertible debt instruments to the investor, including an equity kicker in the arrangement with the private investor. It is likely that the private investor may also require security over the hospital assets. They are also considering an approach made by a competitor medical hospital group who indicated an interest in investing in the hospital. The Medico group in concerned that this is a potential take-over but want to consider it as a way to get funding. Another possibility raised by the group is to enter into arrangement with the local government and enter into a public-private arrangement and in this way gain access to government and public finding. They also request your advice on approaching a group of financiers and whether you can recommend any alternative arrangements.

You drafted the opinion in March 2020 and they now approach you in November 2021 to reconsider the opinion, given the impact of the Covid 19 on the hospital business.

Question: (a) Draft the March 2020 comprehensive legal opinion, setting out the various financing arrangements and the legal issues arising from the financing arrangements. (b) Set out the revisions, if any, in a November memorandum to the March 2020 opinion.

Use SALJ footnotes as referencing style.

I do not intend to submit a tutor's work as your own.