Company Law
LML 406-T
, INDEX
INDEX.................................................................................................................................2
GENERAL MEETINGS......................................................................................................6
1. Kinds of member meetings..........................................................................................6
a. Class meetings..........................................................................................................6
b. General meetings.....................................................................................................6
c. Annual General Meeting..........................................................................................6
2. Voting rights................................................................................................................6
a. Equal voting rights...................................................................................................6
b. Exceptions to equal voting rights.............................................................................7
c. Pender v Lushington................................................................................................7
3. Voting procedures........................................................................................................7
a. Voting procedures....................................................................................................7
b. Voting agreements...................................................................................................7
4. Resolutions...................................................................................................................7
a. Simple majority........................................................................................................8
b. Special resolutions...................................................................................................8
c. Special resolution – requirements............................................................................8
d. Special resolution – notice.......................................................................................8
e. Special resolution – proof........................................................................................9
f. Special resolution – registration...............................................................................9
g. Special resolution - creating authority.....................................................................9
5. Unanimous assent........................................................................................................9
a. General rule..............................................................................................................9
b. In re Duomatic Ltd...................................................................................................9
c. Gholke and Schneider v Westies Minerale (Edms) Bpk........................................10
DIRECTORS: GENERAL.................................................................................................11
1. Directors and the Board of Directors.........................................................................11
2. Legal position of directors and board of directors.....................................................11
a. Definition of director..............................................................................................11
b. Directors - Various legal positions........................................................................11
c. S v Marks...............................................................................................................12
d. Ross & Co v Coleman............................................................................................12
3. Appointment of directors...........................................................................................13
a. Appointment & Acceptance...................................................................................13
b. Power to appoint....................................................................................................13
c. Vacancies...............................................................................................................13
d. Director’s consent to act........................................................................................13
e. Offence: Publication of directors’ names...............................................................14
f. Irregular appointment.............................................................................................14
4. Types of directors......................................................................................................14
a. Alternate directors..................................................................................................14
b. De facto directors...................................................................................................14
2
, c. Re Hydrodam (Corby) Ltd.....................................................................................15
d. Executive & Non-executive directors....................................................................15
5. Qualifications for the office of director.....................................................................15
a. Share qualification.................................................................................................15
b. Statutory disqualification (S 218)..........................................................................16
c. Disqualification by order of court (S 219).............................................................16
6. Removal of directors, resignation and retirement......................................................16
a. Removal by ordinary Resolution...........................................................................16
b. Special notice and representations.........................................................................16
c. Compensation or damages.....................................................................................17
d. Removal ito Articles..............................................................................................17
e. Frustrating removal................................................................................................17
f. Filling a vacancy.....................................................................................................17
g. Swerdlow v Cohen.................................................................................................17
h. Nourse v Farmers’ Co-operative Co Ltd...............................................................17
7. Winding-up: Effect on directors................................................................................18
8. Registers concerning directors and officers...............................................................18
DIRECTORS: RIGHTS & DUTIES.................................................................................19
1. Rights, Powers and duties of directors.......................................................................19
a. Rights & Duties......................................................................................................19
b. Management...........................................................................................................19
c. Confidentiality........................................................................................................19
d. Remuneration.........................................................................................................19
e. Access to company records....................................................................................20
f. Right to discharge duties........................................................................................20
g. Brown v Nanco (Pty) Ltd.......................................................................................20
2. Fiduciary duties..........................................................................................................20
a. Statutory and common law duties..........................................................................20
b. The fiduciary relationship......................................................................................20
c. Protection against exploitation...............................................................................21
d. Basis of liability for breach of fiduciary duty........................................................21
e. Typical breaches of director’s fiduciary duties......................................................21
f. No fiduciary duty towards individual members.....................................................22
g. West Mercia Safetywear Ltd (in liq) v Dodd.........................................................22
h. Regal (Hastings) Ltd Gulliver................................................................................22
i. Cook v Deeks..........................................................................................................23
j. Robinson v Randfontein Estates Gold Mining Co Ltd...........................................23
k. Industrial Development Consultants Ltd v Cooley................................................23
l. Atlas Organic Fertilizers (Pty) Ltd v Pikkewyn Ghwano (Pty) Ltd.......................23
m. Sibex Construction (SA) (Pty) Ltd v Injectaseal CC............................................24
n. Fulham Football Club Ltd v Cabra Estates plc......................................................24
3. Duty to act with care and skill...................................................................................24
a. Meaning of “care” and “skill”................................................................................24
b. Basis of liability for breach of duty.......................................................................24
c. In re City Equitable Fire Insurance Co Ltd............................................................24
3
, d. Fisheries Development of SA Ltd v Jorgensen; Fisheries Development
Corporation of SA Ltd v AWJ Investments (Pty) Ltd.................................................25
DIRECTORS: STATUTORY RESTRICTIONS & PERSONAL LIABILITY................26
1. Restrictions on directors............................................................................................26
a. Restrictions.............................................................................................................26
b. Loans to directors...................................................................................................26
c. Novick v Comair Holdings....................................................................................28
2. Contracts between directors and their company........................................................28
a. Statutory provisions and common law rules..........................................................28
b. Avoidance of voidability........................................................................................28
c. Statutory provisions for disclosure.........................................................................28
d. Failure to disclose..................................................................................................28
e. Time for disclosure................................................................................................29
f. Manner of disclosure..............................................................................................29
g. Recording a disclosure...........................................................................................29
h. Aberdeen Rail Co v Blaikie Bros...........................................................................29
3. Indemnity of directors and relief by the court...........................................................29
a. Statutory provisions...............................................................................................29
b. Limitation on indemnity........................................................................................29
c. Insurance by company............................................................................................30
d. Indemnity against costs of litigation......................................................................30
e. S 248 Relief by the Court.......................................................................................30
f. Barlows Manufacturing Co Ltd v RN Barrie (Pty) Ltd..........................................30
4. Personal liability towards others................................................................................30
a. Statutory provisions...............................................................................................30
b. Personal liability....................................................................................................30
c. Section 424-Fraudulant conduct of business..........................................................30
d. Duties towards creditors........................................................................................31
e. Delictual liability....................................................................................................31
f. Gordon and Rennie v Standard Merchant Bank.....................................................31
g. Ex parte Lebowa Development Corporation Ltd...................................................31
h. Philotex (Pty) Ltd v Standard Merchant Bank.......................................................31
5. Corporate governance and director’s duties..............................................................32
OTHER OFFICE-BEARERS............................................................................................33
1. Employees..................................................................................................................33
2. Company Secretary....................................................................................................33
a. Statutory provisions...............................................................................................33
b. Appointment & Duties...........................................................................................33
c. Relationship towards company..............................................................................34
d. In re Maidstone Buildings Provisions Ltd.............................................................34
e. Panorama Developments (Guilford) Ltd v Fidelis Furnishing Fabrics Ltd...........34
3. Managers....................................................................................................................34
a. Manager – statutory definition...............................................................................34
b. Characteristics, rights & duties of manager...........................................................35
c. Managing director..................................................................................................35
d. Moresby White v Rangeland Ltd...........................................................................35
4
LML 406-T
, INDEX
INDEX.................................................................................................................................2
GENERAL MEETINGS......................................................................................................6
1. Kinds of member meetings..........................................................................................6
a. Class meetings..........................................................................................................6
b. General meetings.....................................................................................................6
c. Annual General Meeting..........................................................................................6
2. Voting rights................................................................................................................6
a. Equal voting rights...................................................................................................6
b. Exceptions to equal voting rights.............................................................................7
c. Pender v Lushington................................................................................................7
3. Voting procedures........................................................................................................7
a. Voting procedures....................................................................................................7
b. Voting agreements...................................................................................................7
4. Resolutions...................................................................................................................7
a. Simple majority........................................................................................................8
b. Special resolutions...................................................................................................8
c. Special resolution – requirements............................................................................8
d. Special resolution – notice.......................................................................................8
e. Special resolution – proof........................................................................................9
f. Special resolution – registration...............................................................................9
g. Special resolution - creating authority.....................................................................9
5. Unanimous assent........................................................................................................9
a. General rule..............................................................................................................9
b. In re Duomatic Ltd...................................................................................................9
c. Gholke and Schneider v Westies Minerale (Edms) Bpk........................................10
DIRECTORS: GENERAL.................................................................................................11
1. Directors and the Board of Directors.........................................................................11
2. Legal position of directors and board of directors.....................................................11
a. Definition of director..............................................................................................11
b. Directors - Various legal positions........................................................................11
c. S v Marks...............................................................................................................12
d. Ross & Co v Coleman............................................................................................12
3. Appointment of directors...........................................................................................13
a. Appointment & Acceptance...................................................................................13
b. Power to appoint....................................................................................................13
c. Vacancies...............................................................................................................13
d. Director’s consent to act........................................................................................13
e. Offence: Publication of directors’ names...............................................................14
f. Irregular appointment.............................................................................................14
4. Types of directors......................................................................................................14
a. Alternate directors..................................................................................................14
b. De facto directors...................................................................................................14
2
, c. Re Hydrodam (Corby) Ltd.....................................................................................15
d. Executive & Non-executive directors....................................................................15
5. Qualifications for the office of director.....................................................................15
a. Share qualification.................................................................................................15
b. Statutory disqualification (S 218)..........................................................................16
c. Disqualification by order of court (S 219).............................................................16
6. Removal of directors, resignation and retirement......................................................16
a. Removal by ordinary Resolution...........................................................................16
b. Special notice and representations.........................................................................16
c. Compensation or damages.....................................................................................17
d. Removal ito Articles..............................................................................................17
e. Frustrating removal................................................................................................17
f. Filling a vacancy.....................................................................................................17
g. Swerdlow v Cohen.................................................................................................17
h. Nourse v Farmers’ Co-operative Co Ltd...............................................................17
7. Winding-up: Effect on directors................................................................................18
8. Registers concerning directors and officers...............................................................18
DIRECTORS: RIGHTS & DUTIES.................................................................................19
1. Rights, Powers and duties of directors.......................................................................19
a. Rights & Duties......................................................................................................19
b. Management...........................................................................................................19
c. Confidentiality........................................................................................................19
d. Remuneration.........................................................................................................19
e. Access to company records....................................................................................20
f. Right to discharge duties........................................................................................20
g. Brown v Nanco (Pty) Ltd.......................................................................................20
2. Fiduciary duties..........................................................................................................20
a. Statutory and common law duties..........................................................................20
b. The fiduciary relationship......................................................................................20
c. Protection against exploitation...............................................................................21
d. Basis of liability for breach of fiduciary duty........................................................21
e. Typical breaches of director’s fiduciary duties......................................................21
f. No fiduciary duty towards individual members.....................................................22
g. West Mercia Safetywear Ltd (in liq) v Dodd.........................................................22
h. Regal (Hastings) Ltd Gulliver................................................................................22
i. Cook v Deeks..........................................................................................................23
j. Robinson v Randfontein Estates Gold Mining Co Ltd...........................................23
k. Industrial Development Consultants Ltd v Cooley................................................23
l. Atlas Organic Fertilizers (Pty) Ltd v Pikkewyn Ghwano (Pty) Ltd.......................23
m. Sibex Construction (SA) (Pty) Ltd v Injectaseal CC............................................24
n. Fulham Football Club Ltd v Cabra Estates plc......................................................24
3. Duty to act with care and skill...................................................................................24
a. Meaning of “care” and “skill”................................................................................24
b. Basis of liability for breach of duty.......................................................................24
c. In re City Equitable Fire Insurance Co Ltd............................................................24
3
, d. Fisheries Development of SA Ltd v Jorgensen; Fisheries Development
Corporation of SA Ltd v AWJ Investments (Pty) Ltd.................................................25
DIRECTORS: STATUTORY RESTRICTIONS & PERSONAL LIABILITY................26
1. Restrictions on directors............................................................................................26
a. Restrictions.............................................................................................................26
b. Loans to directors...................................................................................................26
c. Novick v Comair Holdings....................................................................................28
2. Contracts between directors and their company........................................................28
a. Statutory provisions and common law rules..........................................................28
b. Avoidance of voidability........................................................................................28
c. Statutory provisions for disclosure.........................................................................28
d. Failure to disclose..................................................................................................28
e. Time for disclosure................................................................................................29
f. Manner of disclosure..............................................................................................29
g. Recording a disclosure...........................................................................................29
h. Aberdeen Rail Co v Blaikie Bros...........................................................................29
3. Indemnity of directors and relief by the court...........................................................29
a. Statutory provisions...............................................................................................29
b. Limitation on indemnity........................................................................................29
c. Insurance by company............................................................................................30
d. Indemnity against costs of litigation......................................................................30
e. S 248 Relief by the Court.......................................................................................30
f. Barlows Manufacturing Co Ltd v RN Barrie (Pty) Ltd..........................................30
4. Personal liability towards others................................................................................30
a. Statutory provisions...............................................................................................30
b. Personal liability....................................................................................................30
c. Section 424-Fraudulant conduct of business..........................................................30
d. Duties towards creditors........................................................................................31
e. Delictual liability....................................................................................................31
f. Gordon and Rennie v Standard Merchant Bank.....................................................31
g. Ex parte Lebowa Development Corporation Ltd...................................................31
h. Philotex (Pty) Ltd v Standard Merchant Bank.......................................................31
5. Corporate governance and director’s duties..............................................................32
OTHER OFFICE-BEARERS............................................................................................33
1. Employees..................................................................................................................33
2. Company Secretary....................................................................................................33
a. Statutory provisions...............................................................................................33
b. Appointment & Duties...........................................................................................33
c. Relationship towards company..............................................................................34
d. In re Maidstone Buildings Provisions Ltd.............................................................34
e. Panorama Developments (Guilford) Ltd v Fidelis Furnishing Fabrics Ltd...........34
3. Managers....................................................................................................................34
a. Manager – statutory definition...............................................................................34
b. Characteristics, rights & duties of manager...........................................................35
c. Managing director..................................................................................................35
d. Moresby White v Rangeland Ltd...........................................................................35
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