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Corporate and
Business Law
Botswana
(LW BWA)
June 2023
Examiner’s report
The examining team share their observations from the
marking process to highlight strengths and
weaknesses in candidates’ performance, and to offer
constructive advice for those sitting the exam in the
future.

Contents
General Comments............................................................ 2
Specific comments about Section A performance ........ 2
Example 1 ........................................................................ 2
Example 2 ........................................................................ 2
Example 3 ........................................................................ 3
Summary .......................................................................... 3
Specific Comments about Section B performance ........ 3
Question 46 ...................................................................... 4
Question 47 ...................................................................... 4
Question 48 ...................................................................... 4
Question 49 ...................................................................... 5
Examiner’s report – LW BWA June 2023 1
Question 50 ...................................................................... 5
General Comments

The examination was divided into two sections. Section A consisted of multiple-choice
questions (MCQs). There were 45 questions carrying a total of 70 marks. Section B consisted
of 5 short scenario-based questions carrying 6 marks each which tested candidates’ ability to
identify and apply the law to the given scenarios. Both sections were compulsory.

On the whole candidates performed satisfactorily in the exam. The performance in section A
was fair on the whole. In Section B, candidates were required to be able to identify the relevant
legal issue, state the applicable law correctly and come to a sound conclusion. All candidates
were able to do this for most questions in section B resulting in a reasonable performance.

There was evidence of lack of preparation in some section B questions, and on few occasions,
non-responses were noted. Candidates are reminded to fully prepare for the examination. All
syllabus areas are examinable in each examination. Candidates are also reminded to read
the questions carefully and identify what the question requires before starting their answers.

Specific comments about Section A performance

Section A was satisfactorily answered. The performance indicated that candidates were
reasonably well prepared for this section. As the questions come from all parts of the
syllabus The following questions are examples of questions that presented candidates with
some difficulty.

Example 1

In the context of the Botswana legal system, which of the following statements about
the doctrine of judicial precedent is correct?

A A lower court must always follow the decision of a higher court

B In the event of conflicting decisions of a higher court, a lower court may follow the decision
it deems correct to follow
C A customary court is bound to follow decisions emanating from all common law courts
(1 mark)

The correct answer is B. It is true that where there are two conflicting decisions on the same
legal question, the lower court may follow the view it considers to be correct. Option A is
incorrect because the doctrine of precedent does not require a lower court to follow higher
court decisions at all times. There are exceptions where the lower court may, while providing
reasons, distinguish its decision from that of a higher court. Option C is incorrect because
customary would follow decision from common law courts that deal with the application of that
communities’ particular customary laws and common law which can be applied by Ccustomary
courts, and not all decisions in general.

Example 2

In the context of the law of obligations, which of the following is the name of a term
which is implied into a contract by law?

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A Tacit term
B Naturalia
C Incidentalia
(1 mark)

The answer to this question is A. Tacit terms are implied into a contract by law. Naturalia are
terms that are terms which the law attaches to every contract of a particular class.
Incidentalia are terms that the parties agree as additional requirements to be added to the
contract above the already existing Nnaturalia.

Example 3
Rachel suffered a broken leg in a car accident caused negligently by Sarona. As a result, she
was unable to continue running her sole proprietorship as a house cleaning specialist for a
few weeks. During this time, Rachel slipped on her staircase and severely injured her back.
This led to permanent incapacity. Rachel has sued Sarona for damages citing that she will
never be able to work again.
Which of the following defences can Sarona successfully raise?
A Novus actus interveniens
B Contributory negligence
C Volenti non fit injuria
D The ‘eggshell skull’ rule
(2 marks)

The correct answer is A. Where some other incident occurs that exacerbates the injury
suffered by an individual after a delict, such event is known as a novus actus interveniens.
This defence may be raised by the wrongdoer to limit their liability to the plaintiff. The other
options are incorrect.

Summary

Candidates are reminded to prepare well for the questions in Section A by preparing for
questions in each section carefully. Candidates should be aware that all areas of the syllabus
may be assessed in the examination, therefore thorough preparation gives candidates the
best chances of overall success.

Specific Comments about Section B performance

Section B consisted of 5 short scenario-based questions carrying 6 marks each. Each question
was further divided into two parts. Questions came from across the syllabus. The questions
were designed to test the candidates’ ability to identify the legal issue, explain the law on that
issue and to apply the law to the given scenario and to give a sound conclusion.

A more detailed comment on each question is given below.

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Question 46

This question required candidates to explain if a valid offer and acceptance has
occurred and a contract concluded. An offer is a proposal made by a person with the intention
that by its mere acceptance, and without anything more, a contract should be formed. Where
the intention to be bound by mere acceptance is lacking, the offeror is said to lack animus
contrahendi, or the intention to contract. The nature of the offer, the relationship between the
parties and the circumstances surrounding the making of the offer should be examined in
order to determine if the offer was made with the requisite intention to contract. An offer must
be unequivocal. An ambiguous proposal cannot be classified as an offer. An offer must also
be lawful. Concluding a contract, the subject matter of which is illegal, vitiates the entire
contract.

Part (b) required candidates to explain the characteristics of an invitation to treat. An invitation
to treat may take the form of a direct request to submit an offer as was the case in Biloden
Properties (Pty) Ltd v Wilson (1946). It may also take the form of one party stating their views
with respect to a proposed transaction, together with an invitation to the other party to discuss
them (Ferguson v Merensky (1903)). An invitation to treat is not a true offer because it does
not form a binding agreement by mere acceptance. It is intended to start negotiations with a
view to concluding a contract.

Question 47
In part (a) candidates were required to identify the provisions of s.179 Companies Act, 2003
on prerequisites for the enforceability of pre-incorporation contracts. In terms of s.179
Companies Act 2003, a company can incur liability on a pre-incorporation contract only if
certain requirements are met. First, the contract must be in writing; second, it must have been
entered into by a person who professed to act as agent or trustee of the incorporated company;
third, the contract or a certified copy must be delivered to the Registrar of Companies
simultaneously with the delivery of the application for incorporation and fourth, the company
must adopt or ratify the contract after its incorporation. See TL Investments (Pty) Limited v
Molefe (1985).

In part (b) candidates were required to explain whether a company can be held liable on a
pre-incorporation contract. A company cannot sue or be sued on a pre-incorporation contract
unless the requisite statutory requirements under s.179 Companies Act, 2003 have been met.
However, persons who conclude contracts for the ‘unborn’ company can be held personally
liable on such contracts. In addition, a company may be held liable for return of property
whether real or personal received under an unratified pre incorporation contract. See s.181
Companies Act.

Question 48
In part (a) candidates needed to state the meaning of the term ‘solvency test’. In terms s.58
Companies Act 2003 a company must pass a solvency test before immediately after a
corporate distribution. A solvency test has two components, first liquidity. This means that that
a company can pay its debts as they become due in the normal course of business. Second,
passing a solvency test means that the value of the company’s assets remains greater than
the value of the company’s liabilities – this is known as balance sheet solvency.

Part 48 (b) required candidates to discuss the impact of failure to pass a

solvency test following a distribution. The doctrine of capital maintenance is essentially a
collection of rules designed to ensure, first, that a company obtains the capital which it has
purported to raise; and second, that that capital is maintained, subject to the exigencies of the
business, for the benefit and protection of the company’s creditors and the discharge of its
liabilities. In particular, the doctrine of capital maintenance precludes the return of capital,

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directly or indirectly, to the shareholders ahead of a liquidation of the company. When a
company conducts a corporate distribution, a prerequisite is that dividends should not be paid
out of capital. Dividends must be paid out of profits. Where dividends are paid out of capital,
this has the effect of reducing the capital available for the running of the business, the
discharge of liabilities and the protection of company creditors. This places a business at risk
of compulsory liquidation at the request of creditors who have not received payments as
expected. Directors who fail to properly certify that a company can pass a solvency test
immediately following the distribution commit a corporate offence under the Companies Act,
2003. The directors were aware before distribution of the dividend, that the company would
not pass a solvency test. They allowed the payment of dividends from capital, which is in
breach of rules of capital maintenance. They have committed a corporate offence.

Question 49
Part (a) required candidates to explain how the general meeting is empowered to act by the
court when the board of directors is in default under common law. In some instances, the
board of directors is unable to exercise its powers to direct the company. In such cases, the
board of directors is deemed to be in default. When the board is in default, the common law
empowers the shareholders in a general meeting to exercise the powers of the board of
directors. In a similar case, Foster v Foster (1916), the board was unable to act to appoint a
managing director due to a lack of quorum. The court in that instance held that the general
meeting could elect the managing director because the board of directors was, in that instance,
ineffective. Therefore, in this instance, the shareholders acting to appoint a managing director
when frustrated by the lack of leadership in the company is perfectly lawful. This is because
the board of directors meeting is inquorate and therefore unable to act. In such a situation, the
shareholders may exercise the powers of the board.

Part (b) required the candidates to discuss the director’s duty not to have a conflict of interest.
Under company law, the director must not, without the consent of the company, place
themselves in a position in which there is a conflict between their duties as a director and their
personal interests (Aberdeen Railway Company v Blaikie Brothers (1854)). A director must
not be interested in a contract or proposed contract with the company unless the constitution
of the company so permits, or the company in a general meeting approves the contract. The
director has a duty to declare their interest to the general meeting. Where this rule is broken,
the contract would be voidable at the instance of the company. This means that the
shareholders can vote in a general meeting to ratify the contract. If the company chooses to
void the contract, which has not been executed, it may do so by rescinding the contract. Where
the contract has been executed, the company may require the director to account for the
secret profit they have made.

Question 50
This question (a) required candidates to identify and explain the offence of money laundering..
In terms of s.14 Proceeds and Instruments of Crime (Amendment) Act 2014, money
laundering is defined as any transaction which involves money or property which has been
derived or realised directly or indirectly from some unlawful activity whether committed in
Botswana or elsewhere. There are three stages of money laundering. These are the
placement of funds, layering of financial transactions and finally the integration stage. The
placement stage represents the initial entry of the ‘dirty’ cash or proceeds of crime into the
financial system. Generally, this stage serves two purposes: (a) it relieves the criminal of
holding and guarding large amounts of bulky of cash; and (b) it places the money into the
legitimate financial system. Placement is done through repayment of loans with ‘dirty’ cash,
purchasing of gambling chips, currency smuggling, currency exchanges and
blending of funds. The layering stage entails the international movement of the funds. The
primary purpose of this stage is to separate the illicit money from its source through various
transactions which ensure the audit trail. The final stage of the money laundering process is

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termed the integration stage. It is at the integration stage where the money is returned to the
criminal from what seem to be legitimate sources.

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