Mr Motaung has been a master builder for the past ten (10) years. He operates his business in terms of the wealthy Motaung Trust (IT Number 1233/2010). He intends to submit a tender to the Department of Education for the erection of a new primary school in Rocklands, Bloemfontein. However, he has no knowledge of nor experience in this type of project and is convinced that it would be impossible for him to complete such a project on his own. Mr Motaung considers involving his lifelong school friend, Ms Ditshego, who has a vast knowledge of similar tenders. Unfortunately, Ms Ditshego has a history of unsuccessful projects and is currently an unrehabilitated insolvent.

Mr Motaung decided to incorporate a private company, Motaung Builders (Pty) Ltd, for the purpose of erecting the new primary school in Rocklands. The company has three (3) shareholders: Mr Mokoena (50 shares), Ms Ditshego (40 shares) and Dr Du Toit (10 shares). Mr Motaung and Ms Ditshego are appointed as directors in the company. The directors argue that no auditor is required since Motaung Builders (Pty) Ltd is not registered as a public company.

Ms Ditshego’s life partner, Ms Damane, is a senior director in the Department of Basic Education. Ms Ditshego agrees to pay over 20% (twenty per cent) of the tender amount into the bank account of Ms Damane should the tender of Motaung Developers (Pty) Ltd be accepted. Dr Du Toit was unaware of this arrangement. The tender is awarded to Motaung Developers (Pty) Ltd, and the company paid over 20% (twenty per cent) of the tender amount to Ms Damane.

Mr Motaung approved the purchase order for the bricks required for the building project amounting to R4 million from an unknown manufacturer. Three (3) months later, at a directors’ meeting, Mr Motaung informed Ms Ditshego that it came to his attention that the bricks were of sub-standard quality. It implied that all the completed brickwork had to be demolished. The directors unanimously decided to continue constructing the building with the sub-standard bricks.

Three (3) years later, two (2) learners suffered serious injuries when a wall of the school building collapsed. An engineer identified the poor quality of the bricks as the reason for the tragedy. The parents successfully claimed damages amounting to R2 million from Motaung Builders (Pty) Ltd.

1. Dr Du Toit is not satisfied with the situation. You are a friend of Dr Du Toit. Dr Du Toit is well aware that you are busy with your MBA degree, so he approaches you for some advice.
   1. Evaluate the actions of the directors from a company law perspective in the case study above. (20)

1. Advise Dr Du Toit about the remedies that are available to him. (4)

1.2 Suppose Mr Mokoena, Ms Distshego and Dr Du Toit were members of a close corporation. Explain the position of Dr Du Toit and the other members in this case. (10)

Answer rating: 100% (QA)

Evaluation of Actions from a Company Law Perspective Formation of Motaung Builders Pty Ltd Mr Motaungs decision to incorporate a private company for the purpose of the school project was appropriate H... View the full answer