INSTITUTE OF CHARTERED SECRETARIES AND ADMINISTRATORS IN ZIMBABWE

EXAMINERS REPORT: NOVEMBER 2015

CORPORATE SECRETARYSHIP

GENERAL COMMENTS
0.66% of the candidates achieved a pass mark of 50% and above.
This was a very poor and disappointing result which I believe is attributable to
unpreparedness. There was nothing unusual in the question paper particularly the case
study. In general, candidates knew what the questions wanted but the problem was to do
with the aspect of extracting the relevant information. Most candidates spent time giving
information that was not required which could point to the fact that candidates do not
understand the question. Usage of language was fair but a lot of candidates tended to
waffle a lot without getting straight to the point. Candidate who answers in point form has a
better chance of remaining focused.

QUESTION BY QUESTION ANALYSIS

Question 1-3 were based on the case study
QUESTION 1
a) Answers to this question were very poor. Like with any case study the answers to this
question could be found from the case study. However most candidates had a problem
understanding what was meant by the mechanics. All that was wanted was a breakdown
of what and how the merger was going to be achieved i.e how and to who the NatPack
shares were going to be issued. What were the resolutions required at each stage of the
issue of share. 55 000 000 shares to Bigbox shareholders, 171 000 000 shares to
MegaPack and 164 000 000 shares to PLASCO plc and all this required ordinary
resolutions with some voting exclusion. These did not require special resolution as these
only entailed issue of ordinary shares.

Regarding the issue of the 46 000 000 shares for cash; it also required an ordinary
resolution with a voting exclusion. It was necessary to mention that the shares were
issued at $0.056 per NatPack which then means they were issued at a premium.

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b) This was simple, seemed everyone knew what was required although there was a bit
of unnecessary information in the answers. In terms of the conditions it was
necessary to remember that a change of name required a special resolution, which I
think most candidates remembered together with the issue of name reservation.
What was not clear to most candidates was that a change of name does lead to a
new certificate of incorporation rather the Registrar of Companies will issue a
Certificate of Change of Name.

Regarding the effects of the change of name, these were well articulated but only to
mention a change of name does not invalidate any share certificates which bear the
old name. They will still be valid. On the whole good marks were earned.
QUESTION 2
a) Candidates had a fair idea of the records and statutory returned to make the merger
effective. However to be able to obtain full marks, one had first of all to identify the sort
of corporate events alluded to in the case study. These would then make up the
salient features of the transaction and these were as follows:
Acquisition of the entire share capital of MegaPlastics and BigBox which would
(i)
require a Return of Allotment and updating of the share register
(ii)
Issue of shares for cash return of allotment and updating of the share register.
Increase of Authorised Capital required CR11 Special Resolution and notice of
(iii)
increase in nominal value.
(iv)
Chang of Name which required a special resolution CR11 with the registrar
issuing a Certificate of Change of Name.
Appointment of Directors on CR 14 and updating of the Register of Directors and
(v)
Secretaries.
b) This question proved to be bit difficult to most candidates who attempted the question;
how the approval for the waiver of preemptive rights was to be achieved was the
process required. An ordinary resolution with a special majority was required. This was
clearly spelt out in the case study.
Then the drafting of the resolution came once again. The one relating to the approval of
the waiver of pre-emptive rights was a disaster which also follows the difficulties
encountered in part (b) above.

c) Candidates did not find this part difficult. Almost all candidates were able to outline the
approvals necessary.

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QUESTION 3
a) This was quite a popular question and the answers were fair. The only problem was with
the presentation in most of the answers. The dilution impact was not coming out in
most answers. Candidates were able to identify the fact that CPM was to be the majority
shareholder with shares held directly and indirectly followed by Blue Star Beverages. The
attempt to show the shareholding structure diagrammatically was also fair.
b) Answers to this part were also fair. If the points had been clearly laid out, a lot more
marks could have been obtained. The most important point was that on the whole the
board composition complied with good corporate governance but however there was
need to increase the number of executive directors. This came out in most of the
answers.
c) Most candidates found this part of the question quite easy and the answers were quite
good.

Questions 4, 5 and 6 were not based on the case study

QUESTION 4
a) This was a popular question, but the answers were not good. The question was not so
much about the advantages of ordinary shares against other forms of raising funds such
as debt or private placement. It was to do more with the processing of raising capital
itself. Others talked about the advantages of going public which was not the issue or the
advantages of listing on the ZSE. IPO will definitely raise the profile of the company and
as well as enabling the company to have a wider access to capital. There was need to
mention the cost involved in IPO. Obviously there will be an underwriter which takes
away the risk by the company of failing to raise the required amount.
Regarding the basis of allocation in the event of an over subscription, a number of
suggestion were put forward but it was no clear as to how some would work in general.
On the whole most of the answers were acceptable.
b) This was specific in terms of what was required. It said how can you restrict the transfer
of the shares in a private company? Yes we are aware that one on the condition of a
private company was to restrict the transfer of shares but how do you do that? Needed
to talk about the pre-emptive rights that, is an offer to existing shareholders first.
Another way would be to say all transfers would need to be approved by the Board first.
There is no need to call an EEGM as suggested by some candidates, the fact that that the
price has already been agreed at the AGM does not mean all approvals have to sought at
an AGM.
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The process of share transfer is basically the same whereby a transfer form has to be
completed by both the transferor and transferee and handed over to the Company
secretary to effect the changes and issue a new share certificate. Update the register of
members.
c) This was clear and most candidates knew the reasons for closing the register. However
closing the register will not prevent any trading on the shares, only that transfers will
not be effected. It is not the same as the closing period. Other talked about market
abuse.
QUESTION 5
a) A popular question with disappointing answers. The question was about issues to
consider when you want to register a company. In fact it was about the whole process of
registering a company. What amount of capital needed, name of company, will the
partners be directors, and how will the capital be divided among the partners? It was
not about the comparison between a partnership and a limited liability company which
most candidates wasted time on. Answers could have been better than what was given.
Issues to be considered at the first board meeting was not a problem and these were
well articulated with full marks being given.
b) The issues were well articulated in this part of the question, The AGM should not be held
later than 15 months after the last AGM and in this case the 15 months was almost up.
The second issue was that a special resolution would be required for the approval of the
script dividend option and it was not possible to have the 21 days, Candidates were able
to quote the relevant section which allows companies to apply for an extension from the
registrar of company where you are not able to hold the AGM within the prescribed
period.
c) Fair attempt but better answers could have been better. There was need to give the
different types of preference share shares such as redeemable, participating etc. A
deferred share does not mean dividend is deferred.
QUESTION 6
a) There was so much information and candidates had difficulties in identifying the
relevant information in relation to the question. They ended up giving everything they
knew about the topics. The examiners had difficulty in marking. In a share purchase,
shareholders who accept the offer to purchase will surrender their share certificate and
will no longer be shareholders. The number of shareholders will reduce. In share
reduction the paid up amount and the nominal value of the shares will reduce while the
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number of shareholders will remain the same. This part was not coming up clearly from
most of the answers.
The pros and cons were not clearly spelt out especially the cons. Enhancement of EPS
and NAV was clear. One of the cons was the need for constant cash flow especially
shareholders who need regular cash in the form of dividend.
b) Answers to this part of the question were satisfactory. All the information was provided,
it was just a question of arranging the data.
c) A good attempt to this question.
RECOMMENDATIONS
In conclusion candidates are encouraged to prepare well for the exams by attending
company secretary workshops and revision classes to sharpen their skills. Without that they
will continue produce disappointing results. This is a core subject for this professional
qualification and hence candidates should be well versed with concepts. Theory is the basic,
but out there we will be faced with real issues were they need to apply the theory. If we fail
to do it on paper, what more if we are faced with reality.

End of Examiners Report

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