CIS INTERNATIONAL

QUALIFYING BOARD EXAMINATION

May 2009

Corporate Secretaryship
Date:

22 May 2009

Time:

9h00 12h00

Duration:

3 hours

Marks:

100

Memorandum

Page 1 of 10

QUESTION 1
The candidate must recognize that the issue at hand is not who the shareholder is, but who
may sign documents on behalf of a shareholder-principal or incoming shareholder-principal.
Form CM42 and many Articles require signatures of both. This is a practical application of
Corporate Law principles as they apply to transfer secretaries.
Marks may be awarded for good explanations of the underlying principles. (Eg. The doctrine
of imputed knowledge regarding companies = practical to require copies of public documents.
Eg. Turquand = the reason for copy of resolution.)
However, the marks awarded for each section may not exceed the allocated marks for that
section.
Marks should not be awarded for discussions regarding deceased estates, partnerships, trusts
and the like.
1. Company
- Authority from memorandum & Articles or resolution not power of attorney
- Copies of Articles & Memo, Certificate of Incorporation, Certificate to commence
business
- Representation clause (eg 2 directors must sign). If no number is mentioned, can
assume in order in terms of a resolution.
- Copy of Resolution
- Certified list of directors with specimen signatures
- If intra vires company, but ultra vires Board, require resolution from
General Meeting.
(6)
2. Company in liquidation
- Liquidators certificate of appointment from Master
- No objection to transfer of shares TO such company

(2)

3. Company under Judicial Management

- Certificate of appointment by Master
- No objection to transfer of shares TO such company

(2)

4. Close Corporation
- Every member is agent and may sign
- However, Association Agreement may contain restrictions. Copy of
Association Agreement required.

(2)

CORPORATE SECRETARYSHIP

MEMORANDUM
MAY 2009

Page 2 of 10

5. Societies, Associations, Clubs

- Can only enter into contracts (and acquire property/shares) if legal person
- Non-profits USUALLY legal persons
- Require copy of constitution document
- Copy of resolution
- List of office bearers with specimen signatures
- If in doubt re legal personality, nominee to sign in personal capacity
(6)
6. Insolvent estate
- Contractual powers vest in trustee
- Copy of appointment letter

(2)
[20 marks]

QUESTION 2
This question requires the candidate to be conversant with the requirements of the exception
and to exhibit practical minute drafting skills in circumstances where legislation prescribes
what factors need to be taken into account in the decision making process.
Bad phrasing of the resolutions did not count against a candidate. If the candidate grasped the
essence of the resolutions needed, marks were awarded.

CORPORATE SECRETARYSHIP

MEMORANDUM
MAY 2009

Page 3 of 10

RESPONSIBLE GUYS LIMITED

(1)

MINUTES OF A MEETING OF THE DIRECTORS HELD IN THE BOARD ROOM,

(ADDRESS) ON (DATE)
PRESENT

IN ATTENDANCE:
Quorum:
Apologies:
Minutes:
Matters arising from
the minutes
Loans to BEE Group to
acquire shares

Mr A (Chairman)
Mr B
Mr C
Ms F (Company Secretary)
A quorum being present, the chairman declared the meeting
duly constituted
There were no apologies / Apologies were tabled for
The minutes of the Board Meeting held on . As circulated
were taken as read and signed as a correct record.
None

(1)

Board discusses draft contract re assistance to BEE group:

(11)

(1)
(1)
(1)
(1)

Contingent liabilities considered,

RESOLVED:
Board satisfied that:
Subsequent to
Transaction
assets more than liabilities
fairly valued
and
Subsequent to
Assistance
assets more than liabilities
fairly valued
RESOLVED: That General Meeting be convened & Company
Secretary authorized to circulate notice in order to sanction
transaction.
As there was no further business, the Chairman declared the
meeting closed.
Signed as correct record of proceedings
(Date + Signature
1 Mark for outlay & presentation

(1)
(1)

[20 marks]

CORPORATE SECRETARYSHIP

MEMORANDUM
MAY 2009

Page 4 of 10

QUESTION 3
This question required the candidate to exhibit good writing skills, knowledge of the law of
meetings and to apply that knowledge to the stated case. It is necessary to identify the relevant
matters (convening and notice) and not to expand on irrelevancies. However, it is not
necessary for the candidate to have studied the judgment.
Layout & presentation

(2)

1. All meetings subject to

-

Common Law
Relevant Statutes/Legislation(in casu Company Act, Broadcasting Act)
Regulations applicable to the particular body (in casu, the Articles)

(1)

2. Valid meeting requires:

-

Proper Convening
Duly constituted

3. Convening
-

Convened by proper authority as stated in Regulations (in casu, Articles)

Presumption that company secretary is acting on proper authority.

(1)
(1)

4. Proper Notice
-

To every member entitled to attend (common law) unless Articles provide

otherwise. Defective = invalid meeting
(1)
- Want of notice excused if:
Reasonable enquiries to find person without success
Beyond reasonable summoning distance
No address registered
Effective prior waiver of notice
(4)
- Often Articles excuse accidental omission
(1)
If notice sent but not received due to members negligence to change address =
notice valid
(1)
If all members present and all waive notice = valid meeting
(1)
Reasonable time (if Articles do not stipulate time).
(1)
Clear days notice (if Articles do not stipulate otherwise)
(1)
Served properly (Articles may require post/personally)
(1)
Notice must include
- Place
- Date
- Time
(1)
Include adequate information re object of meeting in order for person to decide
whether he or she will attend.
(1)
Meeting cannot deal with business ultra vires notice (subject to Articles)
(1)
Sent without proper authority may later be ratified by convening authority (1)
Conditional notice is invalid (subject to Articles)
(1)

CORPORATE SECRETARYSHIP

MEMORANDUM
MAY 2009

Page 5 of 10

Court may order meeting to issue notices re Annual General Meeting

if failed to do so i.t.o Regulations/Articles

(1)

5. Application:
-

Appears as if convening was in order.

Notice defective not given to every member entitled = invalid meeting &
Resolution therefore invalid
(3)
[20 marks]

NOTE: 25 marks available. Maximum 20 marks to be awarded.

CORPORATE SECRETARYSHIP

MEMORANDUM
MAY 2009

Page 6 of 10

QUESTION 4

1. Letter format
2. Reasons:
-

(1)

Previously paper-based.
Inefficient in developed securities market
Now STRATE = CSD = Central Securities Depository

(3)

3. STRATE
-

Only CSD in SA
Settles all trades on JSE
Provides simultaneous final and irrevocable delivery & payment
Only from registered participants

(3)

4. Participants in STRATE
-

CSDPs = Central Securities Depository Participants

Eg. ABSA, Nedbank, Standard Bank etc.
Holds sub register (of issuer companys share register)
Consisting of Nominees, Own name clients, Broker nominees, Investor companies
Nominees hold sub-sub register
(5)

5. Dematerialisation process (CBA 18.4.2)

-

Hand to broker or CSPD directly

Will verify and reject if tampered with
Communicates with issuer companys transfer secretary & surrenders certificate
Transfer secretary verifies, cancels in certificated register
Transfer secretary informs CSD & supplies unique number
CSD credits CSDPs account & CSPD credits clients account
(6)

6. Advice to client:
-

Approach broker or CSDP

To dematerialise
Give instructions re selling

(3)
[20 marks]

NOTE: 21 marks available. Maximum 20 marks to be awarded.

CORPORATE SECRETARYSHIP

MEMORANDUM
MAY 2009

Page 7 of 10

QUESTION 5
This is a simple question requiring the candidate to exhibit a detailed knowledge of the relevant
requirements. However, it also requires the candidate to recognise the report as a special report and to
draft the report in a suitable form.
The sub-headings below are but examples and the candidate may choose to make use of a different
format.
1. Suitable report format: Heading, full sentences, sub-headings etc.

(4)

2. To be appointed by public company having a share capital

-

Every Public Company having a share capital to appoint

(1)

3. Qualifications
-

In opinion of directors requisite knowledge and experience

No specific qualifications = usually lawyer, CA or CIS
Person, partnership or body corporate may be appointed if at least
knowledge & experience

one person has

(3)

4. Residency
-

Permanently resident in SA

(1)

5. The following are automatically disqualified

-

Not be disqualified:
- minors,
- legal disability,
- disqualified by court,
- unrehabilitated insolvent (unless court authorises),
- removed from office of trust (unless court authorises),
- found guilty of theft etc.
secretary = officer of company, therefore also not prohibited by court order:
- When convicted of offence regarding promotion etc.
- In winding up Master has reported
- During winding-up or judicial management = reckless or fraud
Not be disqualified by Articles
King = to be subjected to fit & proper test as directors

(7)

6. Appointment of Directors and Auditors

-

Director MAY be appointed, but should be independent from directors.

Suggested that general meeting approves
Auditor not to be appointed for public co (may for private if all members)

7. Recommendations:
a. .....
b. .....

(2)

(2)
[20 marks]

QUESTION 6

CORPORATE SECRETARYSHIP

MEMORANDUM
MAY 2009

Page 8 of 10

This question requires the candidate to identify the matters that need to be attended to at the
first board meeting of a company and requires the candidate to recognise that some items need
to be left out. Furthermore, the ability to draft a comprehensive agenda is tested.

1.
2.
3.
4.

Format: Agenda format

(3)

Election of Chairman
Table Memo, Articles & Certificate of Incorporation
Appointment of Directors
Payment for shares

(1)
(1)
(1)

- subscribers
- Directors qualification shares

(2)

5. Determination of quorum
6. Declaration of Directors Interest
-

(1)

Shares & debentures

Contracts

(2)

7. Appointment of MD
8. Appointment of Public Officer
9. Tabling of addresses
10. Appointment of Auditors
11. Appointment of Company Secretary
12. Opening of Bank accounts
13. Ratification of pre-incorporation contracts
14. Allotment of shares
15. Signatories of certificates
16. Specimen share certificate
17. Display of name
18. Statutory books
19. Opening of financial books

(13)
[20 marks]

NOTE: 24 marks available. Maximum 20 marks to be awarded.

CORPORATE SECRETARYSHIP

MEMORANDUM
MAY 2009

Page 9 of 10

QUESTION 7
7.1
1. Advantage of CC = limited liability
2. However, the Act provides for personal liability when:
-

There was gross abuse of separate legal existence (Sec 65): Haygro case,
Airport Cold Storage case

(1)

(2)

Name & Registration number not on documentation (Sec 23)

Deregistered with liabilities (Sec 26(5))
Breach of fiduciary relationship = responsible to corporation for loss
Did not act with skill (Sec 43) = responsible to corporation for loss
Reckless or grossly negligent or intent to defraud = liable for debts (Sec 64)

(1)
(1)
(2)
(2)
(2)
(10)

7.2
1. All members entitled to participate
2. Consent of 75% needed for:
3.
4.
5.
6.

(1)

Change in principal business

Disposal of (substantially) the whole of the undertaking
Disposal of (greater portion) of assets
Acquisition or disposal of immovable property

Differences to be decided by majority vote.

Has a right to call a meeting (Sec 48)
Notice to members (Sec 48(2)
Advice

(4)
(1)
(1)
(1)
(2)
(10)
[20 marks]

END OF MEMORANDUM

CORPORATE SECRETARYSHIP

MEMORANDUM
MAY 2009

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