Intro

Question 1

What is Corporate law?

Answer 1

The body of law governing the rights, relations, and conduct of persons, companies, organisations and businesses.

Question 2

What is the capital maintenance rule based on?

Answer 2

The principle that the contributed share capital of a company was the fund, or reservoir, to which the creditors of a company could look for satisfaction of their claims.

Question 3

What replaced the common law capital maintenance rule in the Com Act?

Answer 3

A system based on the Solvency and Liquidity of a company.

Question 4

What replaced judicial management in the Com Act?

Answer 4

Business Rescue.

Question 5

What is Judicial Management?

Answer 5

The process in which a court finds that the inability, of a company that is unable to pay its debts, is due to mismanagement or an event that can be overcome.

Question 6

What is the purpose of judicial management?

Answer 6

To enable a failing company to restructure thus providing an alternative to liquidation.

Question 7

What is an appraisal right?

Answer 7

A remedy for the protection of minority shareholders to allow them to opt out of inefficient companies.

Question 8

How has the 2008 Companies Act facilitated better management and corporate efficiency?

Answer 8

1. Replaced the capital maintenance rule with a system based on the solvency and liquidity of the company.
2. Replaced judicial management with business rescue.
3. Simplified procedures for M&A and reorganisation
4. Introduced Appraisal right
5. Introduced system of probation for the rehabilitation of delinquent directors.

Question 9

What are the problematic aspects of the Com Act?

Answer 9

1. The common law continues to exist to the extent that it is not repealed or altered by the Act.
2. The duties of directors is partially codified and has been complicated by the fiduciary duties, duties of care and skill and the business judgement rule.
3. Liability of directors.
4. Anti-avoidance

Question 10

What is section 76 of the Com Act?

Answer 10

Fiduciary Duties.

Question 11

What is section 76(3) of the Com Act?

Answer 11

Duties of Care and Skills.

Question 12

What is section 76(4)(a) of the Com Act?

Answer 12

Business Judgement rule.

Question 13

What is section 6 of the Com Act?

Answer 13

Anti-Avoidance.

Question 14

What is corporate governance?

Answer 14

The system by which an entity is
directed and controlled with a view to ensuring the achievement of its objectives in a sustainable manner within an environment of accountability to its
stakeholders.

Question 15

What is the purpose of corporate governance?

Answer 15

To ensure that a company is successful in the long term.

Question 16

What are the King Codes?

Answer 16

A code of good practice for companies and company directors that emphasise the need for good corporate governance, responsibilities of the board in monitoring exercising and ensuring good governance.

Question 17

To whom must King Reports be applied?

Answer 17

1. Listed companies (must disclose the extent to which the company is compliant with the code).
2. Public Sector Enterprises and Agencies
3. Banks and Financial Insurance Agencies.

Question 18

What is a director?

Answer 18

A member of the board of a company as contemplated in section 66 or an alternate director of a company and includes any person occupying the position of a director or alternate director, by whatever name designated.

Question 19

What is a distribution?

Answer 19

A direct or indirect transfer by a company of money or other property of the company, other than its own shares, to or for the benefit of one or more shareholders of the company or of another company within the same group of companies.

Question 20

What is an MOI?

Answer 20

The document that set out rights, duties and responsibilities of shareholders, directors, and others within and in relation to a company and other matters as contemplated in section 15 (MOI, shareholder agreements and rules of company).

Question 21

What is a Notice of Incorporation?

Answer 21

The notice to be filed in terms of section 13(1) by which the incorporators of the company inform the Commission of the incorporation of that company, for the purpose of having it registered.

Question 22

What is an ordinary resolution?

Answer 22

1. Adopted at a shareholders meeting with the support of more than 50% of the voting rights exercised on the resolution or a higher percentage as contemplated ins section 65(8)
2. Adopted by holders of a company’s securities acting other than at a meeting as contemplated in section 60.

Question 23

What is a personal liability company?

Answer 23

A company whose MOI states that the company is a personal liability company.

Question 24

What is a pre-incorporation agreement?

Answer 24

An agreement entered into before the incorporation of a company by a person who purports to act in the name of, or on the behalf of the company, with the intention or understanding that the company will be incorporated and will thereafter be bound by the agreement.

Question 25

What is a profit company?

Answer 25

A company incorporated for the purpose of financial gain for its shareholders.

Question 26

What is a public company?

Answer 26

A profit company that is not a state-owned company, a private company or a personal liability company.