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MRL 2601- Entrepreneurial law
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Examination questions and answer for MRL 2601 Semester 2. Guaranteed pass.
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MRL 2601Examination
Semester 2
Question 1:
1.1 The Companies Act 71 of 2008 follows the example of the Close Corporations
Act by codifying the general principle of piercing the corporate veil. Section 20(9)
of the Companies Act 71 of 2008 provides that if a court finds that the
incorporation of a company or any act by or use of a company constitutes an
unconscionable abuse of its juristic personality, the court may declare that the
company will be deemed not to be a juristic person in respect of rights, liabilities
and obligations relating to the abuse. The wording of the section is a combination
of section 65 of the Close Corporations Act and the judgment in Botha v Van
Niekerk. It ignores the view expressed in Cape Pacific Ltd v Lubner Controlling
Investments (Pty) Ltd that described the test in Botha v van Niekerk as too rigid.
1.2.1 A private company will be the most suitable for Frank’s needs. A private
company is one whose Memorandum of Incorporation prohibits the public offering
of its shares and limits the transferability of the shares.
The following is characteristics of a private company:
1. It must have one or more directors.
2. It must be formed by at least one person.
3. According to section 8(2)(b) of the Companies Act, a private company's
Memorandum of Incorporation must prohibit the public offering of its
securities and limit the transferability of its securities.
4. The number of shareholders in a private company is no longer limited to 50,
as was the case under the Companies Act of 1973.
5. Its Memorandum of Incorporation prohibits the public offering of any
securities and limits the transferability of its securities.
1.2.2 The Notice of Incorporation must contain the following information:
1. Type of company
2. Financial year end
3. Registered address
4. Number of directors
5. Incorporation date
, 6. Company name.
1.2.3 To register a company, a Notice of Incorporation and a copy of the
Memorandum of Incorporation must be filed with the CIPC, along with the
prescribed registration fee. Section 1 of the Companies Act states that "lodging"
the documents means delivering the needed documents to the CIPC, which is in
charge of registration.
Question 2:
2.1 A pre-incorporation contract is an agreement entered into before the
incorporation of a company by a person claiming to act in the name or on behalf of
the company, with the intention or understanding that the company will be
incorporated and thus bound by the agreement. A person who enters into such a
contract is held jointly and severally liable for liabilities arising from the pre-
incorporation contract if the following events occur:
1. Incorporation does not occur, or
2. The company does not ratify any of the agreement's provisions.
In terms of section 21 of the Companies Act, a pre-incorporation contract will be
binding on a company if:
1. It is signed by a person acting in the name of, or purporting to act in the
name of, a company that has yet to be incorporated under the Companies
Act.
2. The contract was concluded in writing.
3. Within three months of the company's incorporation, the contract must be
fully, partially, or conditionally ratified or rejected.
2.2.1 When determining whether a PTY will be liable for an act of one of its agent
we refer to S54:
S54 (1): in relation to outsiders dealing with a PTY, any member is an agent
of the PTY.
S54 (2): any act of a member shall bind a corporation whether or not such
act is performed for the carrying on of the business if the corporation
unless:
• The member so acting has in fact no power to act for the corporation in
the particular matter, and
• The person with whom the member deals has, or ought reasonably to
have, knowledge of the fact that the member has no such power.
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