CIS INTERNATIONAL QUALIFYING

BOARD EXAMINATION
OCTOBER 2010

Corporate Secretaryship
Date:

22 October 2010

Time:

09:00 12:00

Duration:

3 hours

Marks:

100

General Instructions
1.
2.

3.
4.
5.
6.

Check that you have the correct examination paper - and that it has all its pages
and sections.
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. Please do NOT use
highlighter pens.
Start each answer on a fresh page, clearly numbering it at the top.
Write the numbers of the questions you have answered on the front page of your
answer book.
Securely fasten all pages and check that all answers are correctly numbered.
Submit your working papers wherever applicable - making sure that you clearly
identify them as WORKING PAPERS.

Special instructions for this paper

7.

The examination is divided into TWO sections. Section A is compulsory and carries
40 marks.
8. Candidates should attempt THREE questions from Section B, each of which carries
20 marks.
9. You should allow yourself approximately 70 minutes in total to answer the questions
in Section A and 35 minutes for each of the questions attempted in Section B.
10. 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.
11. Candidates are permitted to use approved copies of the South African Companies Act
1973, Corporate Laws Amendment Act 2006 and the Close Corporations Act 1984,
provided these copies are NOT MARKED in any way.
12. Marks may be awarded when appropriately quoting evidence, such as relevant
legislation.
13. 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.

Page 1 of 7

SECTION A

Compulsory

40 marks

QUESTION 1
1.1

Explain what the most common rules dealing with directors annual retirement
by rotation are and how they are applied.

(6)

What is an alternate director and does he/she have different powers, rights
and obligations compared to an ordinary director?

(6)

Briefly explain what an Incorporated or Inc company is and how it differs

from other companies.

(3)

What is the objects clause in the Memorandum and Articles, what is its
purpose and how is it normally split into sub-clauses?

(4)

What could you as company secretary do if a shareholder shows up drunk at

a shareholders meeting and becomes disorderly and disruptive?

(2)

1.6

What are the rules governing shareholders rights to view minutes?

(2)

1.7

Name, in bullet form, six of the basic elements that must be contained in
minutes of meetings.

(3)

Explain what is meant by:

1.8.1 Share premium
1.8.2 Letters of renunciation
1.8.3 Consolidation of shares
1.8.4 Blank transfer form

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

Briefly explain what a profit-sharing share incentive scheme is and what its
purpose is.

(6)

Name 4 instances where a JSE listed company would not require pre-listing
statements.

(4)

1.2

1.3

1.4

1.5

1.8

1.9

1.10

[40 marks]

CORPORATE SECRETARYSHIP

CIS QUALIFYING BOARD EXAM

OCTOBER 2010

Page 2 of 7

SECTION B

Answer THREE questions from this section.

60 marks

QUESTION 2
Your company has recently entered into a joint venture in Angola, a country with no
specific corporate governance guidelines. The individual who has been proposed as
the Chairman of the new joint venture board is also a General in the Angolan army
and due to his knowledge of the Angolan environment will also be fulfilling the role of
CEO. In terms of the joint venture shareholders agreement, the Chairman will have
a casting vote and although both partners will have equal board representation, the
Chairman has implied that the Angolan partners really know the local situation and
would be best positioned to lead the board decision-making. One of the directors
nominated by the Angolan partner will be the joint ventures legal advisor and the
others nominated by the Angolan partner will be executive directors of the joint
venture. All of the other directors of the joint venture are employees of the South
African holding company.
One of the main risks for the joint venture is security of their assets and the General
has recommended a company, Securitas, which happens to be owned by his wife,
as the most appropriate service provider.
Your companys directors, who will be appointed to the joint venture board, are
accepting everything that the General is proposing, because they agree that he has
thorough knowledge of the Angolan environment. They are also concerned that,
due to his political ties, it could have a negative impact on the joint venture being
granted the requisite licenses to operate, if they express disagreement with any of
his views.
You, as company secretary, will also be responsible for the administration of this
new joint venture and are very concerned that possible bad publicity from poor
governance in this joint venture could affect the South African holding companys
reputation.

Required:Use the King Report on Governance for South Africa 2009 (King III) as a guideline
and indicate your concerns about the situation outlined above in each of the
categories below. Prepare a memorandum for the South African holding companys
Risk Committee Chairman on:

Ethical leadership.
(3)
Acting in the best interests of the company.
(3)
The roles of the CEO and Chairman.
(7)
Balance of power and the concept of non-executive and independent directors. (7)
[20 marks]

CORPORATE SECRETARYSHIP

CIS QUALIFYING BOARD EXAM

OCTOBER 2010

Page 3 of 7

QUESTION 3
You have recently employed a company secretarial intern, without much practical
experience, registered on the new Chartered Secretaries board learnership
programme. Your company (listed on the JSE) has merged with another company
and will, as a result, move offices and change its name. Youve decided to task the
intern with the change of registered office and change of company name, but due to
her lack of experience you have decided to prepare checklists for her as guidance.

Required:3.1
3.2

Prepare a checklist for changing the companys registered office.

Prepare a checklist for changing the companys name.

(5)
(15)
[20 marks]

CORPORATE SECRETARYSHIP

CIS QUALIFYING BOARD EXAM

OCTOBER 2010

Page 4 of 7

QUESTION 4
You are the company secretary for a private company with 1 director. The director
has heard about the new Companies Act and the fact that no new close corporations
will be formed, nor may companies convert to close corporations after the effective
date of the new Companies Act. He has always thought that the companys
business would be better suited to a close corporation than a company and is
therefore considering quickly converting to a close corporation prior to the new
Companies Act becoming effective. He is, however, not aware of exactly how a
close corporation operates or what the rules are and has asked you for some clarity.

Required:Write a memorandum to the director providing an overview of the basic rules

applicable to close corporations, but limited to:

The juristic personality of a CC.

Fiduciary duties.
Transactions for which 75% votes are required.
Payments to members.
Rights of members to contract on behalf of the CC.
Requirements for annual financial statements.
Accounting Officer requirements.
Members liability.
[20 marks]

CORPORATE SECRETARYSHIP

CIS QUALIFYING BOARD EXAM

OCTOBER 2010

Page 5 of 7

QUESTION 5
Your company has recently appointed a new chairman of the board and he has been
openly negative towards you as company secretary. He has, on numerous
occasions, expressed the opinion that a company secretary does not fulfil any role of
substance and that the company should rather just use one of the directors
secretaries to type the minutes of the board meeting, as that is all you do in any
event. You can see that he is slowly damaging your reputation as a value-adding
company secretary and the effort you have expended to change the perception of
the role of a company secretary.

Required:Write a memorandum for inclusion in the next board meeting pack on the role of the
company secretary to convince specifically the chairman of the critical role that you
play and the value you can and do add to the organisation. You should refer to
legislation and corporate governance best practice as deemed appropriate.
[20 marks]

CORPORATE SECRETARYSHIP

CIS QUALIFYING BOARD EXAM

OCTOBER 2010

Page 6 of 7

QUESTION 6
You currently have a number of dormant companies (no business is being
transacted in these entities and there are no creditors) within your corporate
structure for which the administration has been fairly straightforward in the past. The
directors have however heard about the new Companies Act and are concerned that
the administration of these dormant entities might become slightly more onerous in
future and they are therefore of the opinion that the companies should rather be
liquidated. They have asked you to prepare an overview of the voluntary liquidation
process in order for them to obtain an understanding of the process that will have to
be followed, as well as any other possible options for consideration.

Required:Prepare a memorandum for the directors explaining the process to be followed to

voluntarily liquidate a company, when the liquidation would be regarded as having
commenced, the effect of being placed in voluntary liquidation and any related
matters up to the point of the appointment of the liquidator, as well as any other
option/process that might be available to the group by which to terminate these
companies.
Do not refer to the notice, meeting and quorum requirements for the meeting where
a resolution would be proposed, or to the stay of legal proceedings or the custody
and control over the companys property.
[20 marks]

END OF PAPER

CORPORATE SECRETARYSHIP

CIS QUALIFYING BOARD EXAM

OCTOBER 2010

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