topic 1: intro & legal personality

Question 1

What is a juristic personality?

Answer 1

A body recognised by the law as being entitled to rights and duties in the same way as a natural person.

Question 2

What is a sole proprietor?

Answer 2

A natural person with no juristic personality and little legislation governing these entities.

Question 3

What is a partnership?

Answer 3

An agreement between two or more people who make contributions with the intention to make profit, but has no juristic personality.

Question 4

What is a close corporation?

Answer 4

An entity without shares, owned by members who own a percentage of interest, regulated by the Close Corporation Act, and has juristic personality.

Question 5

What is a business trust?

Answer 5

An entity involving a founder, trustee, and beneficiary, similar to a normal trust, but with no juristic personality and limited liability.

Question 6

What defines a private company under the Companies Act?

Answer 6

A profit company that is not public, personal liability, or state-owned, and satisfies criteria in section 8(2)(b).

Question 7

What are the characteristics of a public company?

Answer 7

A widely-held entity with any number of shareholders and freely traded shares, must end with Ltd, and have at least three directors.

Question 8

What is a personal liability company?

Answer 8

A company meeting private company criteria, where directors are jointly and severally liable, and must end with Inc.

Question 9

What is a state-owned company?

Answer 9

A company that must end with SOC Ltd, such as SAA, Eskom, and Postnet.

Question 10

What is a non-profit company?

Answer 10

Incorporated for public benefit, with income and property not distributable, and must end with NPC.

Question 11

What was the purpose of the 2008 Companies Act?

Answer 11

To align company legislation with the 1996 Constitution, stimulate economic growth, simplify regulations, de-criminalise legislation, improve corporate governance, and enhance corporate social responsibility.

Question 12

What is the mission of the 2008 Companies Act?

Answer 12

Simplicity, flexibility, efficiency, transparency, and predictable regulations.

Question 13

What does Section 7 of the Companies Act promote?

Answer 13

Compliance with the Bill of Rights, flexibility and simplicity, corporate efficiency, transparency, improved corporate governance, and predictable regulation.

Question 14

True or False: A company is a juristic person incorporated under the Companies Act.

Answer 14

True.

Question 15

What is a legal personality?

Answer 15

A legal subject capable of having rights and obligations, owning assets, concluding contracts, and litigating.

Question 16

What is the significance of Salomon v Salomon & Co Ltd?

Answer 16

Established the principle that a company is a separate legal subject independent of its shareholders.

Question 17

What does limited liability mean in the context of a company?

Answer 17

The obligations of the entity are its own, and owners are only liable for their contributions, except in personal liability companies.

Question 18

What happens to a company’s assets?

Answer 18

Assets are the exclusive property of the legal person, with shareholders having no direct right to them.

Question 19

What is meant by ‘perpetual succession’ in company law?

Answer 19

A company’s existence is not affected by changes in shareholders or members.

Question 20

What is the role of the Companies and Intellectual Property Commission (CIPC)?

Answer 20

To register and deregister companies, investigate complaints, and enforce compliance notices.

Question 21

What is the function of the Companies Tribunal?

Answer 21

To adjudicate disputes and assist in their resolution as an alternate body to a court.

Question 22

What are the penalties for failure to provide access to company records?

Answer 22

Criminal sanctions as per section 26(9) of the Companies Act.

Question 23

What does a compliance notice entail?

Answer 23

It can be a satisfy notice (compliance certificate) or fail notice (indicating an offence).

Question 24

What is the definition of a company according to Cilliers & Benade?

Answer 24

An association of persons who cooperate for the purpose of profit.

Question 25

Fill in the blank: A company has the capacity to _______.

Answer 25

own assets.

Question 26

What is the purpose of the Financial Reporting Standards Council (FRSC)?

Answer 26

To advise the Minister on financial reporting standards and ensure consistency with international accounting standards.

Question 27

What is the legal consequence of a company being a juristic person?

Answer 27

It is distinct from its members and can sue and be sued in its own name.

Question 28

What are the limitations of juristic personality?

Answer 28

Exceptions include personal liability companies where owners have limited liability.

Question 29

What does 'piercing the corporate veil' refer to?

Answer 29

Disregarding or limiting the legal personality of a company under legislation or common law.

Question 30

Who do profits belong to in a company?

Answer 30

Profits belong to the company. ## Footnote Shareholders receive dividends/distributions.

Question 31

What is perpetual succession in the context of a company?

Answer 31

Change in shareholders/members does not affect existence of entity.

Question 32

What does S 19(1)(a) state about the incorporation of a company?

Answer 32

From the date and time that the incorporation of a company is registered, it is a juristic person that exists continuously until its name is removed from the companies register.

Question 33

Who can act on behalf of a company?

Answer 33

Only natural persons can act on behalf of the company.

Question 34

What must the Memorandum of Incorporation (MOI) state?

Answer 34

The MOI must state who may act on behalf of the company.

Question 35

What is the difference between a void contract and a voidable contract?

Answer 35

Void: contract will always be invalid; Voidable: the court will decide whether contract is valid or not.

Question 36

What does S 8(2) of the Constitution state regarding juristic persons?

Answer 36

Binds juristic persons to constitutional rights.

Question 37

What rights are juristic persons entitled to according to S 8(4) of the Constitution?

Answer 37

Juristic persons are entitled to constitutional rights to the extent required by the nature of the rights and the nature of that juristic person.

Question 38

True or False: Juristic persons have the same extent of privacy rights as natural persons.

Answer 38

False. ## Footnote Juristic persons enjoy the right to privacy but not to the same extent as natural persons.

Question 39

What are the common law requirements for juristic personality?

Answer 39

* Perpetual succession * Must have its own rights/duties/capacities * Lawful purpose * Conduct of the entity is an important deciding factor.

Question 40

What does S 8(3) of the Constitution state about associations formed after 31 December 1939?

Answer 40

No association for the purpose of carrying on any business for gain can be a company unless registered as a company or formed pursuant to another law.

Question 41

What is 'piercing the corporate veil'?

Answer 41

Ignoring the separate legal existence of the company and treating its members as if they were the owners of the assets.

Question 42

What must courts consider when deciding to pierce the corporate veil?

Answer 42

* Exceptional remedy * Sole remedy * Other remedies * Court's discretion.

Question 43

What are the tests for piercing the corporate veil?

Answer 43

* Fraud, dishonesty, and other improper conduct * Unconscionable injustice * Policy considerations.

Question 44

Fill in the blank: The company remains a juristic person, but some consequences are disregarded to prevent _______.

Answer 44

serious abuse of the personality.

Question 45

What principle was established in Cape Pacific Ltd v Lubner Controlling Investments regarding fraud?

Answer 45

If a company is misused to perpetrate fraud, its separate personality can be disregarded.

Question 46

What dual test was introduced in Hulse Reutter v Godde regarding piercing the corporate veil?

Answer 46

Evidence of misuse or abuse and unfair advantage.

Question 47

What are the three instances of unconscionable abuse of juristic personality?

Answer 47

* On the incorporation of the company * Use of the company as a legal entity * Any act by or on behalf of the company.

Question 48

What must be proven to pierce the corporate veil according to common law?

Answer 48

Improper conduct or fraud, or that the entity was used as an alter ego.

Question 49

What is the significance of S20(9) in relation to piercing the corporate veil?

Answer 49

Focuses on abuse of the juristic personality and whether it constitutes unconscionable abuse.

Question 50

What are the consequences of piercing the corporate veil?

Answer 50

* Claim damages * Company’s assets and liabilities treated as those of shareholders. * Rights and obligations of shareholders ascribed to the company.