(a) With reference to both the Companies Act 71 of 2008 and case law, discuss the

circumstances under which a court may pierce the corporate veil of a company.
(15)

(b) If I am a shareholder of Pick n Pay, does that mean that I can go to a Pick n Pay
store and take a basket of groceries without paying, because that is my share of the
company? Why/why not? (10)
[25]

Question 2
(a) Company X (Pty) Ltd has 20 shareholders, each of whom holds a 5% share in the
company. The company sends out a notice of its annual general meeting but only six
shareholders arrive at the meeting. Can the meeting proceed as a validly constituted
AGM? Why/why not?

On the assumption that the meeting can proceed, the six members present consider the
following resolutions:
perform his duties satisfactorily.
ution to appoint ABC Auditors Inc as the companys auditors.
companys authorised share capital.

Are the shareholders present at the meeting able to take decisions on the matters, or
must they consult some or all of the 14 absent shareholders? For each of the three
resolutions, how many shareholders must vote in favour in order for that resolution to be
binding on the company? If any of the 14 absent shareholders had wanted to make his
or her voice heard at the meeting, what could s/he have done?
(15)

(b) Briefly discuss the ways in which a person may cease to be a member of a Close
Corporation.

(10)
[25]

Question 3
(a) Describe the characteristics of each of the following, and explain why an investor
might want to own each of these instruments:

i. An ordinary share.
ii. A preference share.
iii. A share warrant.

(15)
(b) Explain what a statutory derivative action is, and then set out the procedures which
must be followed in terms of s 165 of the Companies Act 2008, in order to bring such an
action.

(10)
[25]
Company Law A June 2011 Page 1 of 2
Question 1
(a) The King Code on Corporate Governance largely follows what may broadly be
called the Anglo-American governance model. Discuss the principal features of
this model, comparing it with the Western European model, and suggest why
the Anglo-American and Western European governance models are different.
(15)

(b) Section 22 of the Companies Act 2008 has been criticized as unrealistic and
potentially detrimental to the normal process of getting start-up businesses up
and running. Explain the criticisms that have been levelled at s 22, and
suggest how s 22 might be amended in order to remove the grounds for
criticism.
(10)
[25]

Question 2
(a) Who may initiate business rescue proceedings on behalf of a company? If the
proceedings are not initiated by the directors acting on behalf of the company,
and the directors wish to stop the proceedings, what can the directors do, and
what test(s) will the company have to satisfy in order to have the proceedings
stopped?
(15)

(b) Explain the difference between a person who is ineligible to be a director and a
person who is disqualified from being a director. In respect of disqualified
directors, explain the escape clause contained in s 69(12) of the Companies
Act 2008, and say whether you think it is a good or a bad idea, and why.
(10)
[25]


Question 3
(a) With reference to case law, discuss the liability of an auditor to both its client
and to third parties, in the event of some failure by the auditor causing loss to
either its client or a third party.
(15)
(b) Explain the difference between a member of a company and a shareholder in a
company, and give examples of situations in which a member is not a
shareholder, and vice versa. Finally, explain how membership of a company
may be terminated.
(10)
[25]
END OF THE EXAMINATION PAPER