Chapter 14

Question 1

S26 of Companies Act

Answer 1

Offense to fail to provide access to records that person has right to see

Question 2

S214 of Companies Act

Answer 2

If financial statement produce false or misleading information, persons party to preparation, approval or publication is guilty of offense

Question 3

Non criminal measures to ensure compliance and protect rights of shareholders include

Answer 3

• Commission issues compliance notices to companies or other persons in certain situation
• Commission can levy admin fin on certain circumstances
• Application can be made for court order to ensure compliance in certain circumstances
• Application can be made to declare director delinquent or under probation
• Defaulting directors and certain other persons may be personally liable in certain circumstances
• Number provisions give rights to shareholders and other stakeholders

Question 4

Abuse of position of director or prescribed officer

Answer 4

non- criminal but blatant abuse of power

Question 5

S162

Answer 5

Application can be made to court to disqualify delinquent director from serving as director or placing them under probation

Question 6

S165

Answer 6

Shareholders have the statutory right to bring proceedings on behalf of company where company has been prejudiced in actions of controlling director and where the company failed to take necessary action to hold directors accountable

Question 7

S77

Answer 7

Personal liability of directors and prescribed officers under variety of different circumstances

Question 8

S218

Answer 8

Personal liability of those people who contravene provisions of Act resulting in loss or damages to others

Question 9

Remedies available to shareholders to protect their own rights

Answer 9

• S163: relief from oppressive or prejudicial conduct
• S161 allows for application to protect rights of securities holders
• s164:provides dissenting shareholders appraisal rights

Question 10

Abuse of separate juristic personality of

Answer 10

Allows for lifting corporate veil and imposition of personal liability in instances where abuse of separate juristic personality of company

Question 11

Remedies against directors abusing their power

Answer 11

-S165: Variety of stakeholders can bring action, i.e. directors, employee representatives or persons with leave of court can bring action

Remedies provided by ss162 and s165

Question 12

Application to declare director delinquent or under probation as per S162

Answer 12

Company, the shareholder, director, representative or Commission.

S162 has serious consequences for director concerned. Persons declared delinquent is disqualified from director of company. disqualification can be for life or minimum period of seven years in other cases

Commission maintains public register of persons who are subject to an order declaring them to be delinquent or under probation

Question 13

Delinquency Statutory grounds

Answer 13

• Consenting to act as director while ineligible or disqualified
• acting as director in manner contravening with relevant order whilst under probation
• While director, acting in manner amounting to gross negligence, wilful misconduct or breach of trust
• grossly abused position of director

Question 14

Declaration of Delinquency

Answer 14

may be unconditional and for life or may be subject to conditions court considers appropriate.

The declaration may also apply to only one or more particular category of company. Conditional declaration of delinquency subsists for period of seven years or longer determined by court.

Question 15

Gihwala v Grancy Property Ltd

Answer 15

Court found conduct of two directors of company fell squarely s162(5)(c). Gross abuses of position of director by taking investments benefits for themselves and excluding the company.
Failed also to ensure company kept proper accounting records as required in terms of 1973 and 2008 Act

Court found directors actions constituted breach of fiduciary duty on their part as directors. declaration of delinquency therefor justified

Question 16

Probation grounds (s162(7))

Answer 16

• Acting in manner materially inconsistent with duties of directors
• Being present at meeting and failing to vote against resolution despite inability of company to satisfy the solvency and liquidity test in circumstances required by Companies Act 2008

Question 17

Declaration of Probation

Answer 17

May be subject to conditions court considers appropriate and subsists for period determined by court but not exceeding 5 years. Court may also order director under probation must be supervised by mentor suing period of probation or limited in serving as director of private company of which person is sole shareholders

Question 18

Foss v Harbottle

Answer 18

minority shareholders stated that company assets had been misapplied and wasted by directors as well as improper mortgage acquisitions. Minority shareholders asked that guilty parties be held accountable to company and receiver appointment

Court dismissed claim and held that company wronged should be the one to sue. Company itself must be plaintiff not shareholders