Chapter 2 Flashcards
Applicable law for a company
Companies Act,2008 and common law
Applicable law for a Close Corporation?
Close Corporation Act and common law
Applicable law for a Partnership?
Based on the law of contract and common law
Applicable law for a Business Trust?
Trust Property Control Act applies to trusts but trust law has been largely developed through decided case law
Who controls a Company?
Directors
Who controls a Close Corporation?
Members
Who controls a Partnership?
The Partnership agreement will determine who controls the partnership business. In certain partnerships, such as partnership en commandite the business is carried on by the disclosed partners and the non-disclosed partners are silent investors.
Who controls a business trust?
Trustees
Airport Cold Storage (Pty) Ltd v Ebrahim 2008(6)
- A company is a juristic entity separate from its
shareholders. - Directors and others can be held personally liable for the
debts of the company when the corporate veil is lifted
Dadoo Ltd v Krugersdorp Municipal Council 1920
Property vests in the company is not and cannot be regarded as vesting in any or all of the shareholders of the company.
Salomon v Salomon and Co Ltd (1897)
Once a company is incorporated it must be treated like any
other independent person with its rights and liabilities appropriated to it.
Section 19(1) of Companies Act,2008.
- From the date and time that the incorporation of a company is registered…the company- (a) is a juristic person.
- A registered company is a legal persona distinct from the members who compose it.
- Distinguishes between incorporation and registration
Lifting the corporate veil
When courts disregard the separate legal personality of a
company and treats the liabilities and/or activities of a company as those of directors or shareholders
Cape Pacific v Lubner Controlling Investments (Pty) Ltd 1995 (4)
A court will pierce the veil where a company is misused in order to perpetrate fraud, or for a dishonest or improper purpose, there is no reason why its separate legal personality cannot be disregarded
Piercing the corporate veil
-Those exceptional circumstances where the court ignores the separate legal existence of the company and treats the shareholders as if they were the owners of the assets and had conducted the business of the company in their personal capacities OR attributes certain rights or obligations of the shareholders to the company.
-Drastic remedy that had been resorted to sparingly and as a last resort in circumstances where justice would not otherwise be done.
What laws permit lifting or piercing the veil to be done?
- In terms of the Common Law; or
- Section 20(9) of the Companies Act
Section 218(2) of the Companies Act, 2008
Provides that directors or any person who fails to comply
with the provisions of the Act is liable to any other person for any loss or damage suffered by that person as a result of failure to comply with the Act.
Example of State-Owned Company
South African Airways, Eskom, SABC etc
State-owned company
Is a profit company that is either listed as a public entity or owned by municipality
Personal liability company
- Is a private (profit) company used mainly by professional associates such as attorneys, entrepreneurs and stockbrokers.
- Directors are jointly and severally liable together with the company for all contractual debts and liabilities incurred during their terms of office
Private company
- Is a profit company.
- Its MOI prohibits the offering of its shares to the
public and restricts the transferability of its shares.
In how many days is an external company compelled to register with the commission after it first begins to conduct activities within SA as an external non profit or external profit company?
Within 20 business days
How long does any rule made by the board of directors take effect after the rule is published.
10 business days or on the date, if any, specified in the rule, whichever date is the later
Amendment of MOI may be done in 3 ways
- By court order
- By a board of directors in terms of section 36(3) and (4)
- A special resolution to amend is proposed (a) by the board of the company, or (b) by shareholders who are entitled to exercise at least 10 per cent of the voting rights
