Company law Flashcards
In which instances will a partnership terminate?
- Death/Insolvency (automatic)
- Giving Notice to terminate (2 months written notice - no reasons)
- Breach/ misconduct (summary termination of partnership: breach of material term; misconduct constituting breach of utmost good faith; conviction of theft, fraud or forgery; mental or physical incapacity to perform duties)
- Retirement (by giving 6 month written notice to the others; automatic retirement at end of financial year in which he turns 65; unable to perf duties due to injury or illness then the others must give 2 month notice to retire)
List the different types of companies
- Profit:
a) public
b) state owned enterprise
c) personal liability
d) private - Non-profit
What is a Notice of Incorporation?
Notice that must be filed with the CIPC to inform it of the incorporation of the company for the purpose of having it registered
What is a Memorandum of Incorporation?
Doc that sets out rights, duties and responsibilities of shareholders, directors and others within and in relation to a company (it has alterable, non-alterable and default provisions)
What is a partnership?
Legal relationship created via a contract between two or more persons, in terms of which each of the partners agree to make some contribution to the partnership business, which is carried on for the joint benefit of the parties and the object of which is to make profit
What are the essentials of a partnership?
- Each partner must contribute something into the partnership (money, labour or skill)
- Business carried on for the joint benefit of the partners
- Object: to make profit
- Contract between the parties should be legitimate
Provide other examples of the dissolution of a partnership:
- By mutual agreement
- End of an undertaking
- Effluxion of a period of time
- Insolvency of partnership/ any of its members
- Dissolution (automatic/ notice)
- Partners become alien enemies on/ after outbreak of war
- Order of court granted on application of one/more partners for good cause
What are the 3 types of trusts?
- Living (vested and discretionary)
- Testamentary
- Bewind (trading vehicles that provide trutees with limited liability and tax advantages)
What is a vested trust?
Benefits set out in the trust deed
What is a discretionary trust?
Trustees have discretion about how much each beneficiary can benefit
Explain the difference between income beneficiaries and capital beneficiaries?
Income benefs: receive distributions from income earned by the trust
Capital benefs: may/must receive a share in the capital of the trust
What are the advantages of a partnership?
- 2 heads better than 1
- Business easy to establish and costs low to start up
- More capital available
- Has greater borrowing capacity
- High-calibre employees can be made partners
- Can split the income (advantageous from a tax perspective)
- Partners’ business affairs are private
What are the disadvantages of a partnership?
- Liability of the partners for the debts of the business are unlimited
- Each partner is jointly and severally liable for their share of the partnership debts
- Might disagree with partners/ have frictions
- Each partner is a agent of the partnership and liable for actions by other partners
- If partners join/ leave, the partners will probably have to value all the partnership assets which can be expensive
What does section 34(1) of the Insolvency Act require?
The trader who intends transferring his business must circulate a notice of such intended transfer in the Gazette and 2 newspapers circulating in the district in which the business operates.
If he fails to do so, the transfer will be void against his creditors for 6 months after the transfer and will be void against the trustee of his estate if it’s sequestrated during that period
What would you put in a contribution clause in the partnership agreement?
The first and second partner shall each contribute X in cash to the capital of the partnership, payable within seven days of the signing of the agreement