QUESTION ONE [40]

XYZ Innovations (Pty) Ltd. is a tech startup founded by John and Sarah, who are childhood friends. The company specializes in developing cutting-edge software solutions for various industries. Over the years, the company has grown rapidly and attracted investors due to its innovative products. However, recently, XYZ Innovations (Pty) Ltd. has been facing financial difficulties, and there have been disagreements between the founders regarding the company’s future.

1.1 Assess how the Companies Act 71 of 2008 shaped the landscape of corporate governance and business practices in South Africa since its enactment, and what the driving forces behind its implementation were. (10)

1.2 Write a short note identifying the type of company XYZ (Pty) Ltd is and set out 4 (four) characteristics that are specific to this type of company. (10)

1.3 Given the company’s financial difficulties, John and Sarah are concerned about

their personal liability. They want to understand how limited liability and the concept of separate legal personality, as provided by the Companies Act 71 of 2008 operate. (10)

1.4 Assess whether John and Sarah’s personal assets are at risk due to the company’s financial troubles and if they can be held personally liable for its debts. (10)

QUESTION TWO [30]

Consider the topics below and provide a detailed response.

2.1 RIGHTS OF A SURETY

To answer this question, you must ensure that you have an understanding of what a suretyship agreement is and who the parties involved are.
Provide a detailed explanation of each of the 5 rights that a surety has. (15)
2.2 PASSING OF OWNERSHIP

Assume that you buy a second-hand motor vehicle from Richard Blue for cash. You conclude the sale agreement with Richard on Friday afternoon, make payment and agree to pick up the motor vehicle the following Monday morning.
Apply your understanding of the passing of ownership to determine at which point you will become the owner of that motor vehicle. (15)

Answers to Above Questions on XYZ Case Study

Answer 1: Analysis of the impact of Companies Act 71 of 2008 on corporate governance indicates that there is a significant level of impact identified with regard to the business practices in South Africa. As a result of it, there is significant enhancement achieved with respect to the corporate governance standard, and it has also strengthened the shareholder rights as well. The main Emphasis of this act is placed on stakeholder engagement and it also emphasizes sustainability and social responsibility.