UNIVERSITY OF SOUTH AFRICA
College of Law
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
MRL2601: Entrepreneurial Law
Assignment 2 | Semester 2, 2026
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
MRL2601
Module Code:
Entrepreneurial Law
Module Name:
Company and Close Corporation Liability
Essay Topic:
Assignment 2
Assignment Number:
Semester 2, 2026
Semester:
10
Total Marks:
Submitted in partial fulfilment of the requirements for Entrepreneurial Law, UNISA 2026
, UNISA | MRL2601 Entrepreneurial Law: Assignment 2
Question 1: Limitations in the Memorandum of Incorporation and Third-Party Lia-
bility
Abahlali (Pty) Ltd’s dilemma turns on how far a company may hide behind a limitation buried in
its own constitutional document once an outsider has already relied on the apparent authority of
one of its directors.1 The Companies Act 71 of 2008 has deliberately narrowed the scope for a
company to escape liability on the strength of an internal restriction, and Abahlali’s prospects of
avoiding the contract with Nawana must be assessed against that statutory framework, together
with the surviving common-law Turquand rule.
1.1 The Company’s Capacity and the Demise of Constructive Notice
Under the common law and the repealed Companies Act 61 of 1973, a company’s capacity was
confined to what its memorandum of association authorised, and every outsider was deemed, by
the doctrine of constructive notice, to know the contents of a company’s public constitutional doc-
uments whether or not they had actually read them.2 That position has been reversed. Section
19(1)(b) of the 2008 Act gives a company all the legal powers and capacity of a natural person,
subject only to any express restriction in its Memorandum of Incorporation, so an act inconsis-
tent with the objects clause is no longer automatically void for want of capacity.3 Section 19(4)
goes further and abolishes the doctrine of constructive notice: a person is not regarded as having
knowledge of the contents of a company’s Memorandum of Incorporation, notice, rules, or any
amendment to any of those documents merely because the document has been filed, or is acces-
sible for inspection, at the company’s registered office.4 Nawana, dealing with Abahlali at arm’s
length, therefore starts from the position that she is not deemed to know that the MOI required
prior consent of the general meeting for a contract of this size.
1.2 Section 20(1): The General Rule of Validity
Section 20(1) of the Act reinforces this outcome. It provides that the validity of an act of a com-
pany is not affected by the fact that the act was inconsistent with any limitation, restriction, or
qualification contained in the company’s Memorandum of Incorporation, unless that inconsistency
is raised in proceedings by a shareholder or director against the company, by the company against
1
Companies Act 71 of 2008, s 15(6).
2
RH Christie, The Law of Contract in South Africa (6th edn, LexisNexis 2011) 45.
3
Companies Act 71 of 2008, s 19(1)(b).
4
Companies Act 71 of 2008, s 19(4).
Page 2 of 9
College of Law
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
MRL2601: Entrepreneurial Law
Assignment 2 | Semester 2, 2026
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
MRL2601
Module Code:
Entrepreneurial Law
Module Name:
Company and Close Corporation Liability
Essay Topic:
Assignment 2
Assignment Number:
Semester 2, 2026
Semester:
10
Total Marks:
Submitted in partial fulfilment of the requirements for Entrepreneurial Law, UNISA 2026
, UNISA | MRL2601 Entrepreneurial Law: Assignment 2
Question 1: Limitations in the Memorandum of Incorporation and Third-Party Lia-
bility
Abahlali (Pty) Ltd’s dilemma turns on how far a company may hide behind a limitation buried in
its own constitutional document once an outsider has already relied on the apparent authority of
one of its directors.1 The Companies Act 71 of 2008 has deliberately narrowed the scope for a
company to escape liability on the strength of an internal restriction, and Abahlali’s prospects of
avoiding the contract with Nawana must be assessed against that statutory framework, together
with the surviving common-law Turquand rule.
1.1 The Company’s Capacity and the Demise of Constructive Notice
Under the common law and the repealed Companies Act 61 of 1973, a company’s capacity was
confined to what its memorandum of association authorised, and every outsider was deemed, by
the doctrine of constructive notice, to know the contents of a company’s public constitutional doc-
uments whether or not they had actually read them.2 That position has been reversed. Section
19(1)(b) of the 2008 Act gives a company all the legal powers and capacity of a natural person,
subject only to any express restriction in its Memorandum of Incorporation, so an act inconsis-
tent with the objects clause is no longer automatically void for want of capacity.3 Section 19(4)
goes further and abolishes the doctrine of constructive notice: a person is not regarded as having
knowledge of the contents of a company’s Memorandum of Incorporation, notice, rules, or any
amendment to any of those documents merely because the document has been filed, or is acces-
sible for inspection, at the company’s registered office.4 Nawana, dealing with Abahlali at arm’s
length, therefore starts from the position that she is not deemed to know that the MOI required
prior consent of the general meeting for a contract of this size.
1.2 Section 20(1): The General Rule of Validity
Section 20(1) of the Act reinforces this outcome. It provides that the validity of an act of a com-
pany is not affected by the fact that the act was inconsistent with any limitation, restriction, or
qualification contained in the company’s Memorandum of Incorporation, unless that inconsistency
is raised in proceedings by a shareholder or director against the company, by the company against
1
Companies Act 71 of 2008, s 15(6).
2
RH Christie, The Law of Contract in South Africa (6th edn, LexisNexis 2011) 45.
3
Companies Act 71 of 2008, s 19(1)(b).
4
Companies Act 71 of 2008, s 19(4).
Page 2 of 9
