Unit 7 - The company as a business form

Question 1

What are the requirements to acquire legal personality by conduct ?

Answer 1

• The property of the members and that of the legal person must be kept
  apart.
• The legal person must have the capacity to incur obligations and to have rights.
• A legal person must be capable of having locus standi to sue in its own name and to be sued in that name.

Question 2

What is the effect of legal personality ?

Answer 2

• Company has its own separate legal personality.
• A distinction must be drawn between the rights and obligations of the company and its shareholders.
• The company is not an agent of its shareholders.
• The shareholders are not liable for the debts of the company.

Salomon case.

Question 3

What are the consequences of legal personality ?

Answer 3

• Separate existence.
• Perpetual existence.
• Entity is a legal subject and can have all the rights of a legal subject.

Question 4

Discuss seperate juristic personality.

Answer 4

• The test is less strict now.
• Should not be treated as an exceptional remedy.
• Group of companies that had shares in each other, used same resources,
  and in the course of business operated as one entity.

Question 5

What is the test for ?

Seperate juristic personality.

Answer 5

• Fraud, dishonest or improper use.
• Unconscionable injustice.
• The actions of “directing the mind and will” of the company towards criminal or delictual liability.
• Discrimination against a company in respect of the race of its members.

Question 6

What is a private company ?

Answer 6

• Not an SOC.
• MOI prohibits offers of any of its securities to the public.
• MOI restricts the transferability of its securities.

Question 7

What is personal liability
company ?

Answer 7

• Meet the requirements for a private company.
• Directors and past directors are jointly and severally liable together with the company for debts incurred during their respective periods in office.

Question 8

What is a public company ?

Answer 8

• A profit company.
• That is not an SOC.
• Which is either a private or a personal liability company.
• With the abbreviation Ltd added to the end.

Question 9

What is a State-owned company ?

Answer 9

• Registered in terms of the Companies Act.
• Listed as a public entity in Schedule 2 or 3 of the Public Finance Management Act.
• Is owned by a municipality, as contemplated in the Municipal Systems Act.
• SOC Ltd must be added to the name.

Question 10

What are non-profit companies ?

Answer 10

• Incorporated for a public benefit or other object.
• The income and property of which are not distributed to its incorporators, members, directors, officers or persons related to any of them except as reasonable compensation for services rendered.
• NPC must added into the name.
• MOI must set out at least one object of the company.

Question 11

What is the difference between a partnership, close corporation and a company ?

Answer 11

• A partnership is a contract between two or more legal persons combining mutliple sole proprietors.
• A close corporation is a juristic person of a maximum of 10 people and constituted under the Close Corporations Act.
• A company is a juristic person, registered and incorporated in various forms under the Companies Act, with business provided for in its MOI.