The Full Years notes (including case law) for Mercantile Law 292. The terms sequence of work sometimes changes but overall the topics themselves remain the same. This summary also includes some of the more NB case law for each section and gives a decent explanation of each law. The notes are design...
TERM 1:
- Types of entities
- Types of companies
- Legal Personality
- Business Trusts
- Beneficiaries
- Partnerships
- Close Corporations
TERM 2:
- Types of Companies
- Formation of Companies
- Memorandum of Incorporation
- Shareholders Meetings
- Company governance and board of directors
TERM 3:
- Company Financing
- Registration and Transferring of Securities
- Offers to the public
- Distributions
- Financial Assistances
TERM 4:
- Company Groups
, TYPES OF ENTITIES
Revision of Term 1
Types of Entities:
1. Sole Proprietorship
- Natural person
- No juristic personality
- Little legislation governing these entities
- Little financing Options
2. Partnerships
- Agreement 2 or more people
- Parties make contributions
o Money
o Time
o Skill
- Intention: to make a profit
- NO Juristic Personality
o Cannot be insolvent will be liquidated instead
- In certain aspects/circumstances can be legal personality
- Can be passed on – Succession
3. Close Corporations
- 1 – 10 Members
o Must be NP or some cases Trusts
- Cannot create CC anymore – 21 May 2011
o Can continue Existing
- Has Juristic Personality
- NOT number of shares/shareholders RATHER referred to as members Interest
o Expressed as % owned of entity
- Regulated by Close Corporations Act
4. Private Company
- A profit company that:
o Is not public, personal liability or state owned company and satisfies criteria in
S8(2)(b)
§ Prohibits offering of securities to public [right of pre-emption]
§ Restricts transferability of securities [discretion on directors to refuse
transfer]
5. Business Trust
- 3 Parties:
o Founder, Beneficiary, Trustee
- No juristic personality
- Limited Liability
o Except where court rules it is juristic person
,TYPES OF COMPANIES
à separate legal personality
à can be disregarded if company used as an alter ego
Company
- Cilliers and Benade à “an association of persons that co-operate for purpose of
profit”
o Problem à not all companies are for profit and little emphasis on Juristic Person
§ Better definition in act
- Juristic Personality
- For Gain/Profit or for another public benefit
-
1. Private Company
§ (Pty) Ltd
- A profit company that:
o Is not public, personal liability or state owned company and satisfies criteria in
S8(2)(b)
§ Prohibits offering of securities to public
§ Restricts transferability of securities
- Has Juristic Personality
- 1973 act à restricted to 50 Members
- 2008 act à no restriction to number of members
o More flexible and easy to register
2. Public Company
§ Ltd
- Widely-held entity à any number of shareholders and shares are traded freely
- Can have any number of shareholders
- At least 3 directors
3. Personal Liability Company
§ Inc.
- Meets criteria of Private Company
- Directors and Past directors jointly and severally liable, together with company
4. State Owned Company
§ SOC Ltd
- Eskom, Postnet
5. Non-Profit Company
§ NPC
- Incorporated for Public Benefit
- Income and Property not distributable
,Common Law:
- Body of legal rules that have been made by judges as they issue rulings on cases, as
opposed to rules and laws made by legislature or in official statutes
- Partly of English and Roman-Dutch Origin
Rights of Legal Subjects
Real Right à Right to property and ownership
Personal Right à Right to claim something from either legal subject on Contractual or
Delictual Basis (e.g Owe Money)
Personality Rights à right to privacy and dignity
Intellectual Property à copy right / trade mark
Juristic Person / Legal Person
- This JP has the capacity and powers
- However they can be restricted because they are not NP
- Also includes:
o A foreign company
o A trust, irrespective of whether or not it was established within or outside the
republic
- Section 19)1):
o From date and time that company is registered, the company is a Juristic Person
(continues until name removed)
à JP is a legal subject which can be bearer of its own rights and obligations and which
exists independently from its members
Consequences of Juristic Person:
- Distinct entity
- Limited liability
- Assets and Profits
- Perpetual succession
- Contracts
- Personality rights and constitutional rights
HOW DOES COMPANY ACQUIRE LEGAL PERSONALITY?
1. Specific Legislation
2. General Enabling Legislation
3. Common Law
If through common law:
a. Does entity conduct itself like a legal person?
b. Does the entity’s constitution have the following elements:
i. Perpetual succession
ii. Entity owns assets
iii. Lawful purpose
, CCCC EBS à 4x C ebs
Reasons For New Act
1. Capital Maintenance
o Principles of Solvency replaced capital maintenance
2. Economic Development
o Needed to stimulate economic growth + entrepreneurship
3. Business Rescue
o 1973 made provisions for BR impractical
4. Constitution
o Need to bring 1973 act inline
o Need to make formation of a company a right to all NOT a privilege
5. Corporate Governance
o Higher standard of corporate governance, corporate social responsibility and
ethics
o Benefit of Investors and Stakeholders
6. Criminal Sanctions
o Problems with enforcement in 1973 ac
7. Simplifications
- 1973 very complex
Reform and Interested Parties
- Classic shareholder-orientated model
- Enlightened Shareholder value approach
- Pluralist Approach – looks at benefits of other Stakeholders
Institutions of Companies Act:
1. Companies and Intellectual Property Commission
à CIPC
- Independent and impartial organ with Juristic Personality
- Duties of Commission: s187
o Register and deregister companies
o Receiving and investigating complaints
o Issuing and enforcing compliance notice
o Making recommendations to FRS council
2. Companies Tribunal
- Independent and impartial organ with Juristic Personality
- Functions: s195
o Adjudicate disputes
o Assist in resolution of disputes
o Alternative to court à cheaper
- Decisions are binding on commission, unless reviewed or appealed
3. Specialist Committees
- Advisory role à mostly on development and law
- Appointed for specific purpose
-
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