Magolide | 15:22 Mon 01st Nov 2021 | Law

2 Answers

Thales (Pty) Ltd is a South African private company that manufactures flavoured condoms. The company is growing rapidly as their product is in high demand. At the end of their second financial year, the company has almost doubled the profits. The board adopts a resolution not to pay a dividend, instead, they decide to use the money to expand their operations across the country as well as neighbouring countries. However, two of the directors prefer receiving money instead of shares.

Since the company plans to open more branches in other parts of the country and also in neighbouring countries, to achieve this, it has to expand the size of the board by appointing new directors. In line with the company’s memorandum of incorporation (MOI), every director must be a shareholder in the company. The company also seeks to establish itself as a community company by employing locals and staffing the management team and the board with qualified local people. The shareholders make the necessary amendments to the MOI by providing for more vacancies in the board. The biggest problem is that a majority of the company’s targets come from disadvantaged backgrounds, making it impossible for them to subscribe for shares. All authorised shares have been issued.

Thales (Pty) Ltd is a relatively new company and has never faced such issues before. The board approaches you for your legal opinion on how they should go about executing their plan. Advise them.