QUESTION $1(55$ marks$)$ You are a Chartered Accountant registered with SAICA. You are considered an expert in corporate governance and statutory matters. One of your clients, Macedonian Legends $($Pty$)$ Ltd $($Macedonian Legends$),$ specialises in developing immersive virtual reality $($VR$)$ games and applications to support remote work, online classes, and training simulations. Despite their innovative approach and engaging historical content, particularly their flagship VR game centred around the life and conquests of Alexander the Great, the company has been struggling with increasing competition from other VR gaming companies that offer more modern or diverse experiences. However, with the rise of work$-$from$-$home arrangements and increased demand for remote learning solutions, this segment of their business has been experiencing notable growth. Alexander Macedon, the Chief Executive Officer $($CEO$)$ and one of the shareholders at Macedonian Legends, has sent you the below email seeking your advice on the company$$s proposed intentions Good day, I hope this email finds you well. I am reaching out to you once again as we are considering a significant restructuring of Macedonian Legends $($Pty$)$ Ltd$.$ Given your previous assistance in various statutory matters, we highly value your insights and guidance. We have developed several plans to address our current challenges and capitalise on growth opportunities. We would greatly appreciate your input on the statutory implications of these plans. Sale of VR gaming segment The focus on VR gaming no longer aligns with the company$$s new strategic direction. Under the revised structure, we plan to concentrate solely on applications for remote work, online classes, and training simulations. As part of this shift, we have decided to sell the VR gaming segment of the business, including related assets such as intellectual property and gaming titles, to a company that specialises in VR entertainment. The VR gaming assets currently constitute $52\%$ of the total assets of Macedonian Legends. Resignation of current auditors and appointment of new auditors Due to recent changes in our structure, our auditors, Ptolemy Inc. tendered their resignation $10$ days ago, on the $31$st of January $2025,$ citing their inability to manage the increased volume and complexity of the work. We have evaluated various aspects of our operations, including the financial oversight and auditing processes. We have agreed that our current audit firm, while reliable, is not best suited to handle the complexities of our new organisational structure. Although we have accepted Ptolemy Inc.$$s resignation, we have not yet filed a formal notice of resignation with the CIPC. I have made the following nominations, which the Board of Directors is now considering: PicturePicture Audit Committee As part of our restructuring, we also recognise the need to establish an audit committee as stipulated in our memorandum of incorporation. However, we initially did not implement this due to our understanding that it was not a legal requirement for private companies under South African law. However, we now realise that having an audit committee is essential for fulfilling several important responsibilities, including: $$Certifying the company$$s annual financial statements and ensuring that the company has filed the necessary returns and notices in terms of the Act. $$Ensuring that a copy of the annual financial statements is sent to everyone entitled to receive them. To fulfil these duties, Philip $($the Marketing Manager$)$ and I will constitute the audit committee. Could you please assist by providing guidance on the statutory implications of these changes? Thank you once again for your assistance. Regards, Alexander Macedon Chief Executive Officer and Executive Director REQUIRED: $1\mathrm{.}1.$Discuss the requirements of the Companies Act $71$ of $2008$ regarding the proposed sale of the VR gaming segment of the business and its related assets. $1\mathrm{.}2.$With reference to the relevant requirements of the Companies Act of $2008,$ advise Alexander Macedon on the appointment of new auditors by Macedonian Legends. In your response, discuss: $$The resignation of the previous auditors, Ptolemy Inc., and the arising vacancy for a new auditor. $$The suitability of the firms$/$individuals listed for appointment as auditor, use the following format to present your answer: Auditor Suitability Conqueror Audit Solutions Empire Audit Partners Darius Insight Auditors Aristotle Inc Gordian & Lysimachus $1\mathrm{.}3.$With reference to the relevant requirements of the Companies Act $71$ of $2008,$ discuss the establishment of an audit committee by Macedonian Legends. In your response, address the following: $$The Companies Act