Aue Tut Letter Essay Example

your answer, it was essential to follow these three steps:

1. Theory (understanding the requirements of the Companies Act).
2. Application (assessing the provided information against each requirement of the Companies Act).

The determination of Mr. Danone's removal legality under the Companies Act is crucial, considering that he was dismissed without notice due to his refusal to resign voluntarily. It is important to note that different requirements apply when a company has more than 2 directors. To address Question 1.4, section 69 of the Companies Act should be applied. As for Question 1.5, Mrs. Cheesy needs to identify any duties of a company secretary that she may be unaware of based on the Act's requirements. This involves considering the duties listed in section 69 and any additional duties not mentioned in the given scenario.

The main issue discussed revolves around granting a loan to Formaggio Proprietary Limited, which is a subsidiary company, with regards to section 45 of the Act. Section 45 permits a company to provide direct or indirect financial assistance to a related or inter-related company as long as certain conditions and restrictions stated in the memorandum of incorporation (MOI) are met.The board of directors must ensure that providing this financial assistance does not hinder solvency and liquidity requirements for the company.Moreover, within the past two years, there must have been a special resolution approving a loan either to the recipient or category of potential recipients.Furthermore,it is necessary to assess whether the terms offered for this financial assistance are fair and reasonable for the company..Once this resolution is authorized, written notifications must be sent to all shareholders and any trade union that represents the employees of the company

within 10 business days. However, if the financial aid exceeds 0.% of Milking It Limited's net worth, the notice should be given within 30 business days after the completion of the company's fiscal year.

1 Marks per statement, limited to (7) Application Formaggio Proprietary Limited is a related company to Milking It Limited. (1? ) The loan granted by Milking It Limited's audit committee to its subsidiary Formaggio Proprietary Limited is not authorized by the board of directors as required by the Companies Act. 1? ) Following an evaluation, the audit committee determined that all conditions and restrictions outlined in the MOI for granting financial assistance were met. (1? ) However, after granting the loan, Milking It Limited fails to meet solvency requirements as its liabilities (R17 000 000) exceed its assets (R9 000 000) when fairly valued. (1? Additionally, Milking It Limited has insufficient liquidity, with current liabilities (R9 000 000) exceeding current assets (R5 000 000).

Formaggio Proprietary Limited was acquired in the current financial year, so the necessary special resolution to approve the loan to the recipient/category of potential recipients would not have been obtained within the previous two years. (1?) On 20 January 2013, the audit committee sent a notice of the resolution to all shareholders. However, this was not done within the required time frame of 10 business days after adoption of the resolution. (1? This notice should have been sent out within 10 business days after adoption of the resolution because the loan to Formaggio exceeds 0.1% of Milking's net worth. (1?) The net worth of Milking is calculated as R12 million (Total Assets) – R15 million (Total Liabilities), resulting

in a net worth of -R3 million. Multiplying -R3 million by 0.1% gives -R3000, indicating that the loan of R3 million exceeds the company's net worth.

Formaggio has obtained an unauthorized loan, which is against section 45 of the Companies Act, 2008. Section 22 states that a company must not partake in reckless or fraudulent actions. If the Commission suspects that a company is involved in prohibited activities or unable to repay its debts, it can send a notice requesting the company to provide justification for why it should be permitted to continue operating.

If Milking It Limited fails to satisfy the Commission within 20 business days regarding its prohibited conduct or ability to pay debts, a compliance notice may be issued. This notice would require the company to cease its business activities. If this happens, Milking It Limited will not be able to meet the requirements set by the Commission.

Due to its liabilities exceeding its assets when reasonably evaluated and current liabilities being higher than current assets, Milking It Limited is currently unable to pass the solvency test and lacks liquidity. As a result, it is trading recklessly and violating the Companies Act of 2008.

According to Section 71, a director can be removed through an ordinary resolution adopted at a shareholders meeting regardless of any provisions in agreements or rules between the company and director or shareholders and director.

Certain requirements must be met before discussing and voting on a resolution for removing a director. Firstly, the director must receive notification about the meeting and resolution aimed at their removal. For public companies, this notification period should be at least 15 business days unless specified otherwise in

the Memorandum of Incorporation (MOI). The director should have an opportunity to present their case before voting occurs either in person or through a representative.

In situations where a company possesses more than two directors, if a shareholder or director asserts that one of the directors has become ineligible or disqualified as stated in section 69, excluding reasons specified in section 69(8)(a), or if the director has become incapacitated and is unlikely to regain their ability to fulfill their responsibilities within a reasonable period;