1.1.

QUESTION 1
According to Milton Friedman, “there is one and only one social responsibility of
business – to use its resources and engage in activities designed to increase its
profits…” With reference to the principle of corporate social responsibility, discuss
the meaning of corporate social responsibility and whether you agree with Milton
Friedman’s view above. Also assess the extent to which engaging in corporate social
responsibility activities may benefit a company that engages in such activities.

Corporate Social Responsibility is a principle geared to encourage owners of

companies operating within a community to be responsible and give back to
their communities. It is understood that the directors of companies have a
duty to balance interest of shareholders stakeholders whose interest are not
profit making. This can be known as sharing profit or appreciation with those
that support your business.1 The company should give back voluntarily rather
than focus on profits making only.

Furthermore, according to the section 7(b)(iii) Company Act 71 0f

2008(hereinafter company act) one of its purposes is to encourage
development of the economy by being transparent and adhering to corporate
governance standards. Section 7(d) of the same act requires the company to
specifically promote economic and social benefits. It further stated in s 7(f))
the act seeks to promote both development of companies as well as
active participation in the economy, management, and productivity
by all. Section 7(j) promotes sound management of companies that
will prevent company losses and failures and avoid negative effects
to the community.

Benefits of Social responsibility

Corporate social responsibility may promote the sustainable value
through mutual benefits of both company and stakeholders. When
stakeholders and customers are happy the company automatically
enhances company reputation becomes the company of choice and
preferred from other competitors. This will improve the share value
and profits thereof. Such company also are given preference by the
government and may enjoy prereferral tenders or procurement.

1
Farouk HI Cassim & others, The law of Business Structures (2nd edn, Juda 2022) 344.
A company with good social performance is demonstrated by treating employees
well. The company can retain its employees for long. Motivated employees resulting
in increase in production and subsequently good profits for the company.
Conclusion
As explained above I submit that, I do not agree with Milton Friedman, that “there is
one and only one social responsibility of business – to use its resources and engage
in activities designed to increase its profits. The company has a duty according to the
company act to promote the development of the economy and give back to the
society in which they operate.

Briefly outline and explain the different types of authority that a director or other
person (agent) who contracts on behalf of a company must have in order to do
so.

According to the Companies Act section 19(1)(b) the company has a legal right and
the powers to that of a natural person unless the person is incapable or does not
have power of performing such duties. The powers may also be limited or restricted
as per the memorandum of incorporation. The restriction or limitation of the powers
may not invalidate the contract when concluded with a third party.

James, the branch manager of the company in Durban contacted the directors of the
company by way of zoom meeting to seek for permission to purchase the bicycles.
The directors instructed James to purchase six of the electric bicycles on behalf of
the company from Cycle for Life (Pty) Ltd. The phone was on speaker and was
overheard by Nancy form Cycle for Life (Pty) Ltd. The previously entered into
agreements with Cycle for Life (Pty) Ltd while representing Touring Africa (Pty) LTD
hence they found it appropriate. It is surprising to for directors of Touring Africa by
Bicycle (Pty) Ltd to refuse to pay an invoice an amount of R720 000.00 to Cycle for
Life (Pty) Ltd in respect of six electric bicycles for Cycle for Life (Pty) Ltd.
1.2.
However, in the case of James, even though he was given permission over the
phone, but the transaction does not fall within the requirements of the memorandum
of incorporation, hence is an ultra vires transaction. It will however be still binding on
the company. Section 20(6) of the act allows shareholders a recourse to claim
damages for any losses beyond the scope of the company’s authority. Such
damages and losses may only be claimed only when it is found out that James acted
in gross negligence in purchasing the bicycles that is inconsistent with the
Companies Act or a limitation, restriction, or qualification on the powers of the
company as stated in its Memorandum of Incorporation.

However because the purchase of bicycles were not ratified by a special resolution
as per section 20(2), the purchase of the bicycles contravene the Memorandum of
Incorporation of the company. The shareholders may claim damages if it can be
proven that James acted negligently but in this case he did not because he was
given and instruction. Hence all other directors being Jane, John and Jabulani are
the directors of Touring Africa by Bicycle (Pty) Ltd should be held liable.

However Nancy from Cycle for Life (Pty) Ltd, must prove that they previously
engaged in similar transaction with James. A reasonable person in the position with
Nancy would not have known that she no longer had the authority to represent the
company. Because that was not communicated. By arguing that Nancy will prove
that her contract with James is binding.
Question 2

Big Money Ltd intends to make a primary offer to the public in order to raise funds. The
directors of Big Money Ltd are aware of certain information that could potentially discourage
the public from purchasing shares in Big Money Ltd. After deliberation, the directors of Big
Money Ltd decide not to include that information in the prospectus. With reference to the
Companies Act 71 of 2008,

discuss whether the directors of Big Money Ltd can be held personally liable to persons who
acquire the securities of Big Money Ltd and who may potentially suffer loss or damage as a
result of the omission of that information from the prospectus. (10) decide not to include that
information in the prospectus

The Directors of Big Money Ltd qualifies to be held personally liable to people who
acquire the securities of Big Money Ltd and who may potentially suffer loss or
damage because of the omission from the prospectus according to section 104(1)(d)
of the Companies Act 71 of 2008.

Section 104(3)(f) of the Companies Act 71 of 2008 states that a liability

will not be attached if the directors could have noticed the omission and
corrected and issued a notice to the public so that they do not deceive the
people. They could have withdrawn the prospectus before allotment or
acceptance. The directors could only escape liability if they could have not
omitted the information that could potentially discourage the public from
purchasing shares in Big Money Ltd, by being truthful. Therefore, they did it
intentionally to deceive the public. They had the opportunity to withdraw the
prospectus indeed and make an amendment but no.

According to section 95(1)(p) of the company act an untrue statement is misleading

in the form of context as much as the information that is omitted or missing. It was
concealed to mislead people. Section 104(1) of the Companies Act provides that a
person who acquired securities based on a prospectus fault or error may recover
losses or damages if they can proof that they suffered the losses because of the
acquired shares upon reliance on the prospectors and that the loss was as a result
of the untrue or misleading information in the prospectus.

2.2.

Section 58(1) (a) of the companies Act allows appointment of a proxy by

shareholders who are unable to attend general meetings to speak, vote and
participate on their behalf. Section 58(2) of the same act state that the proxy must be
in writing with a date and signed by the shareholder. It remains valid for one year.

It is allowable for Busi to appoint a proxy to represent her in the general meeting provided
the proxy satisfies the requirement of section 58 and if the appointment of proxy is provided
by the company memorandum of incorporation. In the case of Busi the memorandum of
incorporation allows Busi to appoint a proxy, in writing, that is signed and should be
delivered to the company secretary forty-eight (48) hours before commencement of the
meeting. Busi can participate in the meeting by appointing a proxy.

However, in the case of Busi she only got to know two hours before the meeting that
she would not be able do attend. Is impossible for her to meet the 48 hours
prescribed by the memorandum of incorporation. Busi will not be able to appoint a
proxy to represent her. On another view, Busi may request to vote through a written
resolutions per section 60 of the Companies Act 71 of 2008.

In the case of Barry v Clearwater Estates NPC 2017 (3) SA 364 (SCA) the court held that
a proxy can be appointed at anytime given time. The memorandum of incorporation
should not restrict proxy appointment time to 48 hours like in the case of Strada (Pty)
Ltd. Relying on Barry’s case Busi can appoint a proxy at any time and not restricted to 48
hours stated in the MOI.

Distinction between alterable and unalterable provisions in the Act. S 58(1) is

unalterable and cannot be amended by the company’s MOI. In this case it was
held that a proxy can be appointed at any time. The MOI wanted to restrict the time
of appointment to 48 hours before the meeting.