LSB2605 Assignment 2 (ANSWERS) Semester 2 2026
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1. Which of the following is the primary source of South African company law?
A. Roman-Dutch common law
B. Companies Act 71 of 2008
C. English law
D. Customary law
Correct Answer: B. Companies Act 71 of 2008
Explanation: The Companies Act 71 of 2008 is the principal statute governing companies
in South Africa, supplemented by common law and regulations.
2. A company that offers shares to the public and is listed on the Johannesburg Stock
Exchange is classified as a:
A. Private company
B. Personal liability company
C. Public company
D. State-owned company
Correct Answer: C. Public company
Explanation: A public company may offer shares to the public and is often listed on a
securities exchange such as the JSE.
3. Which of the following is a characteristic of a private company?
A. It may offer shares to the public
B. Its name ends with “Ltd”
C. Its name ends with “(Pty) Ltd”
D. It must have at least seven directors
Correct Answer: C. Its name ends with “(Pty) Ltd”
, Explanation: Private companies are identified by the suffix “(Pty) Ltd” and cannot offer
shares to the general public.
4. The memorandum of incorporation is best described as:
A. A document that registers the company with SARS
B. The founding document that sets out the rights, duties, and responsibilities of
shareholders, directors, and others
C. A financial statement submitted annually
D. A list of company employees
Correct Answer: B. The founding document that sets out the rights, duties, and
responsibilities of shareholders, directors, and others
Explanation: The memorandum of incorporation (MOI) is the sole governing document of
a company under the Companies Act.
5. A company’s legal personality is acquired upon:
A. Registration of the memorandum of incorporation
B. Issuing shares to the public
C. Appointment of the first directors
D. Opening a bank account
Correct Answer: A. Registration of the memorandum of incorporation
Explanation: A company acquires separate legal personality once the Companies and
Intellectual Property Commission registers the MOI.
6. The doctrine of separate legal personality was established in:
A. Foss v Harbottle
B. Salomon v Salomon & Co Ltd
C. Dadoo Ltd v Krugersdorp Municipal Council
D. Royal British Bank v Turquand
Correct Answer: B. Salomon v Salomon & Co Ltd
Explanation: Salomon v Salomon confirmed that a company is a separate legal person
distinct from its shareholders and directors.
7. Which of the following best describes the “veil of incorporation”?
A. The physical location of the company
, B. The separation between the company and its shareholders
C. The company’s financial records
D. The company’s tax obligations
Correct Answer: B. The separation between the company and its shareholders
Explanation: The veil of incorporation separates the legal identity of the company from
its shareholders, protecting them from personal liability.
8. Piercing the corporate veil means:
A. Dissolving the company
B. Holding shareholders or directors personally liable for company obligations
C. Increasing the company’s share capital
D. Changing the company’s name
Correct Answer: B. Holding shareholders or directors personally liable for company
obligations
Explanation: Courts may pierce the corporate veil in cases of fraud, abuse, or improper
conduct to hold individuals personally accountable.
9. Under the Companies Act, the board of directors is responsible for:
A. Day-to-day management of the company
B. Registering the company
C. Paying all shareholder debts
D. Drafting tax laws
Correct Answer: A. Day-to-day management of the company
Explanation: The board of directors manages the business and affairs of the company,
subject to the MOI and the Act.
10. A director’s fiduciary duty to act in the best interests of the company includes the duty
to:
A. Maximise personal profit
B. Avoid conflicts of interest
C. Favour certain shareholders
D. Ignore company interests when personal gain exists
Correct Answer: B. Avoid conflicts of interest
Explanation: Directors must avoid conflicts of interest and act in good faith for the
benefit of the company.
(279509)
1. Which of the following is the primary source of South African company law?
A. Roman-Dutch common law
B. Companies Act 71 of 2008
C. English law
D. Customary law
Correct Answer: B. Companies Act 71 of 2008
Explanation: The Companies Act 71 of 2008 is the principal statute governing companies
in South Africa, supplemented by common law and regulations.
2. A company that offers shares to the public and is listed on the Johannesburg Stock
Exchange is classified as a:
A. Private company
B. Personal liability company
C. Public company
D. State-owned company
Correct Answer: C. Public company
Explanation: A public company may offer shares to the public and is often listed on a
securities exchange such as the JSE.
3. Which of the following is a characteristic of a private company?
A. It may offer shares to the public
B. Its name ends with “Ltd”
C. Its name ends with “(Pty) Ltd”
D. It must have at least seven directors
Correct Answer: C. Its name ends with “(Pty) Ltd”
, Explanation: Private companies are identified by the suffix “(Pty) Ltd” and cannot offer
shares to the general public.
4. The memorandum of incorporation is best described as:
A. A document that registers the company with SARS
B. The founding document that sets out the rights, duties, and responsibilities of
shareholders, directors, and others
C. A financial statement submitted annually
D. A list of company employees
Correct Answer: B. The founding document that sets out the rights, duties, and
responsibilities of shareholders, directors, and others
Explanation: The memorandum of incorporation (MOI) is the sole governing document of
a company under the Companies Act.
5. A company’s legal personality is acquired upon:
A. Registration of the memorandum of incorporation
B. Issuing shares to the public
C. Appointment of the first directors
D. Opening a bank account
Correct Answer: A. Registration of the memorandum of incorporation
Explanation: A company acquires separate legal personality once the Companies and
Intellectual Property Commission registers the MOI.
6. The doctrine of separate legal personality was established in:
A. Foss v Harbottle
B. Salomon v Salomon & Co Ltd
C. Dadoo Ltd v Krugersdorp Municipal Council
D. Royal British Bank v Turquand
Correct Answer: B. Salomon v Salomon & Co Ltd
Explanation: Salomon v Salomon confirmed that a company is a separate legal person
distinct from its shareholders and directors.
7. Which of the following best describes the “veil of incorporation”?
A. The physical location of the company
, B. The separation between the company and its shareholders
C. The company’s financial records
D. The company’s tax obligations
Correct Answer: B. The separation between the company and its shareholders
Explanation: The veil of incorporation separates the legal identity of the company from
its shareholders, protecting them from personal liability.
8. Piercing the corporate veil means:
A. Dissolving the company
B. Holding shareholders or directors personally liable for company obligations
C. Increasing the company’s share capital
D. Changing the company’s name
Correct Answer: B. Holding shareholders or directors personally liable for company
obligations
Explanation: Courts may pierce the corporate veil in cases of fraud, abuse, or improper
conduct to hold individuals personally accountable.
9. Under the Companies Act, the board of directors is responsible for:
A. Day-to-day management of the company
B. Registering the company
C. Paying all shareholder debts
D. Drafting tax laws
Correct Answer: A. Day-to-day management of the company
Explanation: The board of directors manages the business and affairs of the company,
subject to the MOI and the Act.
10. A director’s fiduciary duty to act in the best interests of the company includes the duty
to:
A. Maximise personal profit
B. Avoid conflicts of interest
C. Favour certain shareholders
D. Ignore company interests when personal gain exists
Correct Answer: B. Avoid conflicts of interest
Explanation: Directors must avoid conflicts of interest and act in good faith for the
benefit of the company.
