INTERNATIONAL QUALIFYING BOARD

EXAMINATION
May 2014
CORPORATE SECRETARYSHIP (BE-4)
Date:
Time:
Duration:
Marks:

26 May 2014
08h45 12h00
15 minutes reading time +
3 hours
100

General Instructions
1. Check that you have the correct examination paper and that it has all its pages and sections.
2. Write clearly and only use BLACK BALL-POINT INK. Do NOT use felt-tip pens or pencils. Cross
out errors in ink do NOT use correcting fluid.
3. Start each answer on a fresh page, clearly numbering it at the top.
4. Write the numbers of the questions you have answered on the front page of your answer book.
5. Securely fasten all pages and check that all answers are correctly numbered.
6. Submit your working papers where applicable making sure that you clearly identify them as
WORKING PAPERS.

Special instructions for this paper

7. THE EXAMINATION PAPER CONSISTS OF SIX QUESTIONS. EACH QUESTION CARRIES
25 MARKS. YOU MUST ANSWER FOUR QUESTIONS ONLY.
8. Read through the question prior to attempting to answer.
9. Use fictitious names when answering questions that require the names of the author and/or the
company (e.g. memorandum, report, letter, minutes, notice, etc.); do not use your own name or
that of your employer.
10. This is an open book examination only authorised references may be used or brought
into the venue. See overleaf.
11. References to legislation, case law or other documents should include the full name when initially
noted and may thereafter be referred to in an abbreviated form if indicated as such. Sections
from the Act should be referred to where applicable and students should indicate which Act they
are referring to merely referring to the Act, unless defined, would not be sufficient.
12. Wherever the term Companies Act is used in this question paper it refers to the South
African Companies Act 71 of 2008.
13. You will be allocated 15 minutes reading time. You may only start writing in the examination book
when instructed to do so by the invigilator
.

Permitted Open Book Resources

Candidates are permitted to have with them in the examination room (and may refer to)
only the following legislation:

the Companies Act 71 of 2008

the Companies Regulations, 2011
the Close Corporations Act 69 of 1984

NO OTHER RECOMMENDED READING MATERIAL or TEXT BOOKS or STUDY

NOTES WILL BE ALLOWED.

Corporate Secretaryship

May 2014

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ANSWER FOUR QUESTIONS ONLY

QUESTION 1
Read the scenario and answer the questions.
You are the company secretary of Big Joe Fast Foods Limited, a company
listed on the JSE Limited. The board of directors of the company has decided
to appoint a new firm of auditors, Jenkins and Jenkins Incorporated, in place
of Pointing Incorporated. The audit committee has been consulted in respect
of the change of auditors but has not yet formally approved the change. The
board has also agreed to the change and recommended that the formalisation
of the change be done by written resolution.

Required
Prepare an explanatory memorandum for your company secretarial trainee,
who has only partially completed her CSSA course, in respect of the following:
1.1

1.2

Set out the requirements of the Companies Act and outline the action
which will have to be taken to formalise the resignation of the previous
auditors and the appointment of the new auditors by both the audit
committee and the board.

(15)

In terms of item 1.1 above, explain what must be done with the signed
documentation and include a note on the requirements for the retention
of minutes, resolutions and records of a company.

(10)

[25 marks]

Corporate Secretaryship

May 2014

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QUESTION 2
Read the scenario and answer the questions.
You are an independent company secretarial and corporate governance
consultant and have been contracted by KNP Holiday and Golfing Estate Ltd.,
an unlisted public company, located in Nelspruit, South Africa. The chairman
of the board is concerned about a number of problems that have recently
arisen and seeks your advice, viz.
(a) The company secretary has resigned following a sudden illness and they
need to replace him as soon as possible.
The company has interviewed several potential candidates. The list had
been narrowed down to three final candidates. The CVs have been
handed to you for review and to make a recommendation as to the most
suitable of these candidates. The review, credit and criminal record
checks have revealed the following:

Ms Mpho Ndalas qualifications and experience meet the requirements

for the position, but she has indicated that she will not be moving to
Nelspruit, where the companys head office is based, but would
commute from Mbabane in Swaziland.
Mr Jack Green also has the necessary qualifications and experience
but two years previously was dismissed as company secretary of a
large company on the grounds of misconduct involving dishonesty.
Ms Maureen Plaatjies has a law degree and her credit and criminal
checks are clear. She is currently studying for her CSSA Board
examinations.

(b) Some minor punctuation and cross-referencing errors have been found in
the Memorandum of Incorporation and the board has requested that
advice be sought on how these errors could be corrected.
(c) A former disgruntled employee, who is a shareholder of the company, has
indicated his unhappiness that the company has not declared dividends
for the past three years, despite having been sent the annual financial
statements and a letter explaining that due to the downturn in the
economy, the board has considered it inadvisable to pay dividends (make
any distributions). The shareholder was threatening to take the matter to
the Companies Tribunal.

Corporate Secretaryship

May 2014

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Required:
2.1

2.2

2.3

Prepare a memorandum for the board discussing and comparing the

eligibility or non-eligibility of each candidate as set out in (a). Thereafter,
make a recommendation to the board on which candidate to choose;

(8)

Advise the board on the steps they need to follow and the statutory
requirements with regard to the alteration of the Memorandum of
Incorporation as set out in (b); and

(7)

Provide feedback on what a complaint to the Companies Tribunal as

set out in (c) would entail. Advise the board accordingly.

(10)

[25 marks]

Corporate Secretaryship

May 2014

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QUESTION 3
Read the scenario and answer the questions.
You are an independent company secretarial and corporate governance
consultant and have been temporarily appointed by Big Tree Sugar Estates
Limited, a large unlisted company, to temporarily carry out the duties of
company secretary following the suspension and pending the outcome of a
disciplinary enquiry of its company secretary, Mr Tom Chance. The reason
for the suspension was that he had signed car hire documentation from
Surtees Car Hire, with which the company held an account and used for all
corporate car hire, in his own name and added Company Secretary. This
car had been hired while Mr Chance was on his annual holiday. The Chief
Financial Officer (CFO) does not want to pay Surtees Car Hire and is claiming
that Mr Chance must pay Surtees Car Hire directly.
The CFO has requested your advice and asked you to prepare a report for
submission to the board at its next meeting.

Required
Write the report, advising the board of the legal recourse available to the
company. Use relevant legislation and case law to substantiate your advice.
[25 marks]

Corporate Secretaryship

May 2014

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QUESTION 4
Read the scenario and answer the questions.
You are the company secretary of African Adventures Ltd., a company which
has recently listed on the JSE Ltd.
The following critical issues need to be considered:

The directors have very limited experience in dealing with the JSE Ltd.
although they have all been directors of the company for some time. The
board feels that they need additional training, especially with regard to
their obligations in respect of integrated reporting requirements. One of
the executive directors, however, feels that it is all red tape and merely
an expensive regulatory exercise that really means nothing at the end of
the day.
In terms of the Companies Act, section 72(4), the company is mandatorily
obliged to form a social and ethics committee. Appointment of the
necessary committee members was approved at the last board meeting,
but this is the first time any of them have ever been involved in such a
committee.

Required
The board of directors has requested that you prepare the following:
4.1

A report for inclusion in the next board pack:

Advising the board of the necessity of preparing and publishing

financial statements which comply with integrated reporting
requirements;
Outlining the regulatory and statutory provisions in respect of the
various statements and results that are required; and
Highlighting the consequences for the individual directors, the board
and the company as a whole for non-compliance with these
provisions.

(15)

A draft agenda for discussion with the social and ethics committee
chairman who is an independent non-executive director.

(10)

4.2

[25 marks]

Corporate Secretaryship

May 2014

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QUESTION 5

Read the scenario and answer the questions.

The board of directors of International Vegetable Distributors Ltd., a public
unlisted company, has been in business for seven years having grown
annually and constantly achieved profits. The last three years profits have
been in excess of R10 million after tax, taking into consideration headline
earnings adjustments on a pre-tax basis. The company currently has 250
shareholders. The Chief Executive Officer and the Chief Financial Officer, and
the founders of the company hold 50% of the shares and the balance are held
by employees and former employees who had been given shares as part of
a share incentive plan. In establishing the share incentive plan three years
previously, the directors of the company had taken a long term view of
ultimately listing the company when the continued growth of the company
seemed likely.

Required
5.1

5.2

The Chief Executive Officer has asked you to prepare a report for
inclusion in the next board pack setting out the criteria for listing a
company on the main board of the JSE Ltd.

(10)

Based on the above scenario and considering the pros and cons of
listing a company, give an opinion and advice on whether you consider
the listing of the company is feasible. Support your advice with reasons
for your opinion. In addition, advise the board on the regulatory and
practical issues that will need to be taken into account if the listing goes
ahead.

(15)

[25 marks]

Corporate Secretaryship

May 2014

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QUESTION 6
Read the scenario and answer the questions.
The following article has recently appeared in the Gauteng Daily Times
business section:
ANOTHER QUESTIONABLE PARTNERSHIP?
At a gala dinner last night in the Tops Hotel in central Johannesburg, the Chief
Executive Officer of JP Couriers Limited announced that they were about to
enter into a contract with Starlight Airlines Limited to the value of R50 million
per annum. He stated that this would increase the companys international
operations considerably at the same time offering clients a faster and more
efficient service. The Chief Executive Officer, Mr Gert Jantjes and Chief
Financial Officer, Mrs Nthabaseng Masoga, of Starlight Airlines, in response
to questions, stated that the contract would add a great deal of value to
Starlight and that they were very excited about the deal.
Note by the author: Is this just another one of THOSE contracts supporting
nepotism and corruption which our country is plagued with, bearing in mind
that Mrs Nthabaseng Masoga, a large shareholder and Chief Financial Officer
of Starlight Airlines, is the wife of Mr Peter Masoga, an independent nonexecutive director of JP Couriers?

Required
Upon reading this article, Mr Peter Masoga has sought your advice in respect
of directors declaration of interests and other matters. Prepare a detailed
explanatory memorandum to Mr Masoga who has requested you to assist him
with the following queries:
6.1

6.2

6.3

An explanation of a directors obligations to declare personal financial

interests in contracts. The explanation should include the
consequences of any failure to declare his interests.

(16)

The action which he should take at the meeting of directors when the
contract is considered.

(4)

Whether his obligations as an independent non-executive director differ

from those of an executive director.

(5)

[25 marks]
(Total: 100 marks)

END OF QUESTION PAPER

Corporate Secretaryship

May 2014

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