Campers Ltd was established in 2010 and have had impressive returns for the years preceding COVID-19. After going into the reserves to keep the business afloat, they have had to develop new strategies. The board has approved an initiative that requires the company to take a R50 million. (Information extracted from their Balance Sheet) Total Assets – R50 million Total Liabilities – R 40 million (Information extracted from the Income Statement) Bank account – R25 million Rental – R5 million (per annum) Utilities (fibre, telephone, water and electricity, security) – R1 million Salaries -R15 million Q.2.1 Apply the solvency and liquidity test and advise whether or not the board was correct in instructing that the company take a loan for R50 million. In your answer: • explain the test and what it involves; • calculate the financial position of the company, based on the figures provided above; and • provide an opinion on the correctness of the board’s decision Q.2.2 Assume for this question only that Mrs Funeka, the chairperson of the board, takes it upon herself to acquire a loan on behalf of the company without the necessary resolution. The contract is entered into between Mrs Funeka on behalf of the company and Kekana Investments. Is the contract valid? Can the company be bound by the agreement? In your answer discuss the following: • The impact of the Turquand Rule on third parties • Whether or not the company is liable
Campers Ltd was established in 2010 and have had impressive returns for the years preceding
COVID-19. After going into the reserves to keep the business afloat, they have had to develop
new strategies. The board has approved an initiative that requires the company to take a R50
million.
(Information extracted from their Balance Sheet)
Total Assets – R50 million
Total Liabilities – R 40 million
(Information extracted from the Income Statement)
Bank account – R25 million
Rental – R5 million (per annum)
Utilities (fibre, telephone, water and electricity, security) – R1 million
Salaries -R15 million
Q.2.1 Apply the solvency and liquidity test and advise whether or not the board was correct in instructing that the company take a loan for R50 million. In your answer:
• explain the test and what it involves;
• calculate the financial position of the company, based on the figures provided above; and
• provide an opinion on the correctness of the board’s decision
Q.2.2 Assume for this question only that Mrs Funeka, the chairperson of the board, takes it upon herself to acquire a loan on behalf of the company without the necessary resolution. The contract is entered into between Mrs Funeka on behalf of the company and Kekana Investments. Is the contract valid? Can the company be bound by the agreement? In your answer discuss the following:
• The impact of the Turquand Rule on third parties
• Whether or not the company is liable
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