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Business Law > BER 220 Sem Test 1 > Flashcards

BER 220 Sem Test 1 Flashcards

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1
Q

What are the characteristics of a partnership

A

-Formation by contract
-Aim to make a profit
-Association of at least 2 members
-Not a juristic person
-Partner bear a risk of venture

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2
Q

What are the essentialia of a partnership agreement/contract

A

-Contribution to joint partnership assets
-Carrying-on of a common business for the joint benefit of all partners
-Object - Make profit
-Intention of partners

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3
Q

What are the rights of partners

A

-Profits, remuneration, interest and indemnity
-Control and related matters

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4
Q

What are the duties of partners

A

-To contribute
-To maintain bona fides
-To exercise care
-To share in losses

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5
Q

What is actio communi dividundo

A

Used by a partner to disolve an asset that is jointly owned in undivided shares

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6
Q

Sources of authority partners can use to bind partnership

A

-Express authority
-Ostensible authority
-Implied Authority
-Ratification

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7
Q

What is mutual mandate

A

Automatic power/authority that partners have to bind the partnership in transactions that are w/in the scope of the business

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8
Q

If Jed has been concluding contracts and all of a sudden Sfiso questions this new contract, its an example of

A

Estoppel/ostensible authority
-Sfiso created the impression Jed had authority to transact
-Thus still making the contract valid

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9
Q

Ways to dissolve a partnership

A

-Agreement
-Effluxion of time/Completion of business
-Court order
-Death
-Change in memebership

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10
Q

Provide the general and Act definition of companies

A

-Genny
>An association of persons working together w/ the main objective of making a profit
-Act
>A juristic person that is incorporated in terms of the Act, as well as on incorporated as a Co in terms of the CCs Act and has subsequently converted to a CO

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11
Q

Characteristics of a CO

A

-Legal personality
-Bearer of rights and duties
-Separate legal personality
-Piercing corporate veil

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12
Q

Differences between Co and Partnerships

A

-P - min members = 2 and C min =1
-P is formed via a agreement w/o fromal reqs, C through the Co Act and
-P is formed w/ main objectoe to make a profit, C can be formed where main objective = not make a profit

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13
Q

Describe Piercing the corporate veil

A

-A principle that allows the courts in the event of abuse of the separate legal entity, to pierce the separate legal personality to see who has abused it
-Ground for piercing
>Crime
>Recklessness
>Fraud
>Negligence

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14
Q

What are the types of profit Cos

A

-Private
-Public
-State owned

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15
Q

Explain the Pre-incorporation contract

A

-Entering a written contract on behalf of a Co that has not yet be inc
-W/in 3months after inc, Co must ratify or reject contract
-If they do nothing, they will be deemed to have ratified and will be bound
-Promoter of the Co will be jointly and severally liable to the 3rd party if Co rejects or is not inc

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16
Q

What are constitutional values

A

-Human dignity
-Freedom
-Equality
-Human rights
-Non-racialism and sexism

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17
Q

What doc is the constitutive doc of Cos

A

The Memorandum of Incorporation

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18
Q

Explain the doctrine of constructive notice

A

-Means 3rd parties dealing w/ COs should know the docs that are filed at the Commission/available for inspection @ the Co’s office
-Doctrine has partially been abolished
-Still applicable to RF COs and Personal liability COs

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19
Q

What is the MOI

A

Doc which a Co is inc and sets out rights, duties and responsibilities of shareholders, directors and other w/in and in relation to the Co

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20
Q

What is ultra vires

A

When a director concludes a contract outside the scope of the business

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21
Q

How can a Co be bound to contracts

A

-Implied authority
-Express authority
-Ostensible authority
Ratification

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22
Q

What is the Turquand rule

A

-A 3rd party who concludes a contractw/ a co in good faith is entitled to assume that internal reqs have been completed
-Only protects 3rd parties who acted in good faith, meaning they didnt know the req was not completed

23
Q

Describe Alterable rules

A

Provisions of the Act in which expressly states that their effect on a particular Co may be altered by the MOI of a Co

24
Q

What are unalterable rules

A

Provisions that can only be changed in the MOI if the change provides a more rigorous/stricter provision

25
Q

What are ways Cos can raise capital

A

-Investment of assets by funding shareholders
-Issuing of shares
-Profits made from services offered by the Co
-Taking out loans and offering debentures

26
Q

What is authorised share cap

A

-A Co’s MOI must set out the classes and # of shares that the Co is authorised to issue
-Also set out the rights, limitations and other terms of those shares

27
Q

What is issued share cap

A

-The amount received as contribution for shares already issued

28
Q

What is the solvency and liquidity Test

A

-Test entails that;
>Assets must be = or exceed liabilities when fairly valued and
>Co must be able to pay its debts 12 months after the test is considered

29
Q

What are distributions

A

-Dividends in cash or otherwise
-Payment in cash instead of capitalisation shares
-repurchase of shares by Co

30
Q

What are the reqs of a distribution

A

-In terms of an existing obligation OR
-In terms of a court order OR
-Where BoD authorses such distribution
-Co should still satisfy Solvency and Liquidity test after distribution
-Distribution must be effected w/in 120days

31
Q

Define the auditor

A

-FS of public Co must be audited
-Auditor must be independent from Co
Certain NPC and Private Co FS must be audited

32
Q

Define organs of Cos

A

-Natural persons who represent the Co in the commercial world = Directors
-Natural persons who inc CO and invest in Cos = Shareholders

33
Q

Deine shareholders

A

-Ppl who own share(s) in a Co and who are registered as such in the certified/uncertified shares register of the Co

34
Q

Ways to cease being a shareholder

A

-Death
-Insolvency
-Dissolution of Co
-Transfer and sale of shares

35
Q

Define certified and uncertified shares

A

-Certified: Shares that are evidenced by a certificate
-Uncertified: No certificate
-The record of uncertified shares are administered and maintained by the Central Securities Depository (CSD)

36
Q

Describe the transfer of securities (shares)

A

-A share as a personal right is transferred by cession
-Cedent will cede;
>Voting right
>Dividend
>Right to share in NAV upon winding up of Co

37
Q

Roles of Organs and Officers of Co

A

-Organs = Directors + Shareholders
-Social and ethics committee
>Ensures Co are responsible citizens
>Cos should subscribe to the principle of Ubuntu
>Cos should contribute to the betterment of the community
-Audit Committee
>Members ensure proper appointment of auditor and that auditor performs properly

38
Q

Statutory remedies for unlawful conduct by majority shareholders

A

-s20(6): Shareholders have a claim against anyone who intentionally, fraudulently or due to gross negligence causes the Co to transgress the MOI/Act
-s218: Any person who transgresses the Act id liable to anyone who suffers loss/damage due to transgression

39
Q

AGMs and resolutions

A

-Decisions taken @ AGM = resolutions
-Resolutions
>Ordinary res (51% -% of votes)
>Special res (75+%)

40
Q

Directors duties

A

-Act in good faith of common law (Fiduciary duty)
-Duty of care and skill

41
Q

Liability for breach of statutory duties (diretors)

A

-Director will be held liable for the breach of statutory duty of good faith (s77)

42
Q

Role of winding up a Co

A

-Process of dissolving a CO
-Its assets must be collected, converted into cash and paid to it creditors

43
Q

Describe deregistration of a Co

A

-When affairs of Co are completely wound up, the CIPC will record the dissolution of the CO and remove the CO’s name from the Companies Register
-Other circumstances CIPC can deregister a Co
>Co has transferred to a foreign jurisdiction
>Co did not file an annal return for 2+yrs in succession and did not give reason
>Co appears to be inactive for at least 7yrs

44
Q

Characteristics of CCs

A

-Came into existence due to CC Act 69 pf 1984
-Can no longer register CCs cos of Co Act but existing CCs can still operate or convert to Cos
-CHARCTERISTICS
>A CC is endowed w/ legal personality and acquires all the benefits associated with it
>Unlimited capacity and has same capacity and pwrs as a natural person
>Max # members = 10 (Natural persons)
>Formation is subject to few formalities, thus CC is cheaper than Co

45
Q

Ways to acquire Member’s Interest in a CC

A

-By admission as an additional member
-By acquisition of an existing member’s int
-From an insolvent estate
-From a deceased estate

46
Q

Describe the management of CCs

A

-Parties have = right to participate in management of CC (unless specifically excluded)
-Decisions are adopted by 51% of votes
-The following require 75%+
>Change of the main business of CC
>Disposal of the whole business/part of assets
>Acquisition/Disposal of immovable property by the CC

47
Q

Capacity of members to rep CC in contracts w/ 3rd parties

A

-s54
>Ever member has = pwer to rep the CC (unless excluded)
>Any contract concluded will bind CC unless
»>Member had no authority
»>3rd party knew/ought to know member did not have authority

48
Q

Conversion of a CC to a Co

A

-A CC can file a notice of conversion into a CO in the prescribed form and manner and upon payment of the filing fee
-Conversion must be approved by a least 75% of the members int
-The CIPC will cancel the registration of the CC and give notice of the conversion to the Govt Gazzette
-Then every member will become a shareholder of Co

49
Q

When a member sells their MI, first they have to offer their MI to existing members before selling to outsiders.
This is a…

A

Pre-emptive right

50
Q

Describe the pre-emptive right

A

-Provides that before a member sells their member’s interest, they should offer it to existing members before offering to outsiders
-Only once existing members have rejected can they sell to outsiders

51
Q

Explain Business Rescue

A

-A mechanism that is used to rehabilitate financially
distressed companies to return to financial viability by providing temporary supervision of the company, a grace period from claimants against the company and the development and the implementation of the business rescue plan

52
Q

What are the prerequisites of the business plan rescue

A

-Company should be financially distressed
-There should be a reasonable prospect of success in rehabilitating the company

53
Q

Explain the Business Judgements rule/test

A

-It provides that when a director has taken a bad decision that has led the company to suffer a loss or damage, a director will be deemed to have complied with the duty of care, skill and diligence and to act in the best interest of the company, provided the bad decision contains the following elements:
»The director took reasonably diligent steps to be informed about the matter
»The director did not have a personal financial interest in the
matter or a related person had no financial interest
»If the director or a related person had an interest, the director disclosed the interest.
»The director believed on rational basis that the decision was in the best interest of the company.

Business Law (4 decks)

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