BER220 – Business Law
Contents
THEME 1: Entrepreneurial Law................................................................ 2
PARTNERSHIPS .......................................................................................... 2
Chapter 23: The Law of Partnership ..................................................... 2
COMPANIES ............................................................................................. 6
Chapter 24: Introduction to company law ......................................... 6
Chapter 25: Memorandum of Incorporation ...................................... 9
Chapter 26: Capital .............................................................................. 11
Chapter 27: Shareholders/ Organs/ Officers..................................... 14
Chapter 29: Winding-up/ Business rescue/ Deregistration .............. 17
CLOSE CORPORATIONS........................................................................ 19
Chapter 30: Introduction to Close Corporations ..............................19
Chapter 31: Membership and Member’s Interest ............................19
Chapter 32: Internal and external relations ...................................... 22
THEME 2: Law of Securities ................................................................... 26
Chapter 18: Suretyship ......................................................................... 26
Chapter 19: Mortgage/ pledge/ cession in security ........................ 28
Chapter 20: Hypothecs and Liens ...................................................... 31
Theme 3: Law of Insolvency.................................................................33
Chapter 34: Insolvency Introduction and sequestration ................. 33
Chapter 35: Effect of Sequestration ................................................... 37
Chapter 36: Administration of Insolvent Estates................................38
Theme 4: Labour Law ...........................................................................40
Chapter 37: General Introduction ......................................................40
Chapter 38: Individual Labour Law .................................................... 42
Chapter 39: Collective Labour Law ...................................................48
1
,THEME 1: Entrepreneurial Law
PARTNERSHIPS
Chapter 23: The Law of Partnership
1. PARTNERSHIP AS BUSINESS VENTURE
Difference Partnership
from close coming together of 2+ persons
corporation/ conclude a partnership agreement
corporation aim: running a business
purposes: making a profit for their joint benefit
All should contribute - will be at disposal of partnership
for the purposes of running business
all are subjected to risk
Characteristics 1. Formation by contract
comply with requirements of conclusion of contract
no requirements of formality
Consumer Protection Act 68 of 2008:
- requires registration of business name with
Companies Intellectual Property Commission
2. Aim to make profit
main object: acquisition of gain (commercial profit/
patrimonial gain)
3. Association of at least 2 members
One person cannot form a partnership
Companies Act 71 of 2008:
- No limit to max number of members
4. Not a juristic person
Not a separate legal entity
Cannot exist separately from members
No legal personality – assets are owned jointly
Partners are jointly liable
Claims must be jointly enforced
High court rule 14 and Magistrates’ courts rule 52
- for the sake of convenience
- allow partners sue in the name of the partnership
and third parties to sue the partnership in its name
Insolvency
- Partnership’s estate will simultaneously be
sequestrated with estates of partners
- But separately from partnership’s estate
- 2 separate trustee’s accounts
5. Partners bear risk of venture
Bear total risk of failure
All partners will be simultaneously sequestrated
2
,2. FORMATION OF PARTNERSHIP
Process By conclusion of partnership contract
With serious intention of forming partnership relationship
Each must inter alia contribute
Business should be carried on for joint benefit
Essentialia 1. Each must contribute something of value subject to risk
2. Carrying-on of common business for joint benefit
Business need not be continuous
Each partner must have interest
Each partner acts as principal
Partners have common interest in net profits
Profit divided
1. determined in partnership agreement or
2. in proportion to value of each’s contribution or
3. in equal shares
Agreement that one won’t share profit = void
Partners wont share profit ≠ partners ≠ joint enterprise
3. Partnership should be operated for purpose of making profit
4. Intention of parties
Essentialia is prima facie: sufficient to conclude partnership
agreement
Must still have intention to conclude partnership
Requirements Parties must reach consensus/agreement
of partnership Parties must have contractual capacity
contract Contract/ performance must be legally possible.
Performance must be physically possible.
Contractual formalities must be complied with.
3. RIGHTS OF PARTNERS
Profits/ Entitled to net profit
remuneration/ When there is agreement that
interest/ They are entitled to remuneration and interest on capital
indemnity Always indemnified (protected) against
Damages/ expenses incurred in execution of duties
Control Each partner may conclude management actions
In transactions within scope of business
except when there is agreement to contrary
Disputes are solved by majority rule
An aggrieved minority partner has option to leave
Access to Partners who undertake not to misuse confidential info
books/ May inspect books irrespective of motive
records Unless excluded ito agreement/ waive their right
May demand books be kept at place of business
Use of assets Partners have access to assets
To promote business
Cannot deny another unless they consented
Cannot take/ dispose of for personal use
3
, 4. DUTIES OF PARTNERS
To contribute Failure to do so:
Partners can institute action pro socio to claim it
To share in As per agreement
losses Absence of agreement: in proportion profits are shared
Some partners can be excluded
Overhead costs/ risk of business borne by all
To exercise Same degree as they would in private affairs
care Responsible for intentional/ negligent action
If it leads to loss of profit/ damages
To maintain Owe fiduciary duty to one another
bona fides Act honestly when representing
Disclose info and avoid conflict of interest
Account for/ distribute profits made
Disclose assets in their possession
Mustn’t do anything to harm/ undermine
Mustn’t keep profit made due to breach of good faith
5. LITIGATION BETWEEN PARTNERS
Actio pro Way to enforce compliance ito agreement
socio Instituted in name of partners
May be instituted during existence without dissolution
Actio Available after dissolution
communi Where partnership is jointly owned in undivided shares
dividundo Use to obtain division of jointly owned property
Prescription of debts not completed until 1 year after
Partner can claim assets upon dissolution only
Upon liquidation – no actios can be taken
6. OBLIGATIONS
Contractual May authorize 3rd party to conclude contracts
They act as both principal/ representative
Mutual mandate
Automatic authority within scope of business
Can be excluded by agreement
Expressly grant authority for transactions outside
For 3rd party to rely on mutual mandate: must be bona fide
Partners can ratify unauthorized contracts
Partners can be held responsible by estoppel
In order to bind partnership, following must be present
Communications of the partner must be indicated
Conduct of the parties must indicate as such.
Knowledge of the third party must indicate as such.
Other surrounding circumstances must be indicated
Doctrine of undisclosed principal
4
Contents
THEME 1: Entrepreneurial Law................................................................ 2
PARTNERSHIPS .......................................................................................... 2
Chapter 23: The Law of Partnership ..................................................... 2
COMPANIES ............................................................................................. 6
Chapter 24: Introduction to company law ......................................... 6
Chapter 25: Memorandum of Incorporation ...................................... 9
Chapter 26: Capital .............................................................................. 11
Chapter 27: Shareholders/ Organs/ Officers..................................... 14
Chapter 29: Winding-up/ Business rescue/ Deregistration .............. 17
CLOSE CORPORATIONS........................................................................ 19
Chapter 30: Introduction to Close Corporations ..............................19
Chapter 31: Membership and Member’s Interest ............................19
Chapter 32: Internal and external relations ...................................... 22
THEME 2: Law of Securities ................................................................... 26
Chapter 18: Suretyship ......................................................................... 26
Chapter 19: Mortgage/ pledge/ cession in security ........................ 28
Chapter 20: Hypothecs and Liens ...................................................... 31
Theme 3: Law of Insolvency.................................................................33
Chapter 34: Insolvency Introduction and sequestration ................. 33
Chapter 35: Effect of Sequestration ................................................... 37
Chapter 36: Administration of Insolvent Estates................................38
Theme 4: Labour Law ...........................................................................40
Chapter 37: General Introduction ......................................................40
Chapter 38: Individual Labour Law .................................................... 42
Chapter 39: Collective Labour Law ...................................................48
1
,THEME 1: Entrepreneurial Law
PARTNERSHIPS
Chapter 23: The Law of Partnership
1. PARTNERSHIP AS BUSINESS VENTURE
Difference Partnership
from close coming together of 2+ persons
corporation/ conclude a partnership agreement
corporation aim: running a business
purposes: making a profit for their joint benefit
All should contribute - will be at disposal of partnership
for the purposes of running business
all are subjected to risk
Characteristics 1. Formation by contract
comply with requirements of conclusion of contract
no requirements of formality
Consumer Protection Act 68 of 2008:
- requires registration of business name with
Companies Intellectual Property Commission
2. Aim to make profit
main object: acquisition of gain (commercial profit/
patrimonial gain)
3. Association of at least 2 members
One person cannot form a partnership
Companies Act 71 of 2008:
- No limit to max number of members
4. Not a juristic person
Not a separate legal entity
Cannot exist separately from members
No legal personality – assets are owned jointly
Partners are jointly liable
Claims must be jointly enforced
High court rule 14 and Magistrates’ courts rule 52
- for the sake of convenience
- allow partners sue in the name of the partnership
and third parties to sue the partnership in its name
Insolvency
- Partnership’s estate will simultaneously be
sequestrated with estates of partners
- But separately from partnership’s estate
- 2 separate trustee’s accounts
5. Partners bear risk of venture
Bear total risk of failure
All partners will be simultaneously sequestrated
2
,2. FORMATION OF PARTNERSHIP
Process By conclusion of partnership contract
With serious intention of forming partnership relationship
Each must inter alia contribute
Business should be carried on for joint benefit
Essentialia 1. Each must contribute something of value subject to risk
2. Carrying-on of common business for joint benefit
Business need not be continuous
Each partner must have interest
Each partner acts as principal
Partners have common interest in net profits
Profit divided
1. determined in partnership agreement or
2. in proportion to value of each’s contribution or
3. in equal shares
Agreement that one won’t share profit = void
Partners wont share profit ≠ partners ≠ joint enterprise
3. Partnership should be operated for purpose of making profit
4. Intention of parties
Essentialia is prima facie: sufficient to conclude partnership
agreement
Must still have intention to conclude partnership
Requirements Parties must reach consensus/agreement
of partnership Parties must have contractual capacity
contract Contract/ performance must be legally possible.
Performance must be physically possible.
Contractual formalities must be complied with.
3. RIGHTS OF PARTNERS
Profits/ Entitled to net profit
remuneration/ When there is agreement that
interest/ They are entitled to remuneration and interest on capital
indemnity Always indemnified (protected) against
Damages/ expenses incurred in execution of duties
Control Each partner may conclude management actions
In transactions within scope of business
except when there is agreement to contrary
Disputes are solved by majority rule
An aggrieved minority partner has option to leave
Access to Partners who undertake not to misuse confidential info
books/ May inspect books irrespective of motive
records Unless excluded ito agreement/ waive their right
May demand books be kept at place of business
Use of assets Partners have access to assets
To promote business
Cannot deny another unless they consented
Cannot take/ dispose of for personal use
3
, 4. DUTIES OF PARTNERS
To contribute Failure to do so:
Partners can institute action pro socio to claim it
To share in As per agreement
losses Absence of agreement: in proportion profits are shared
Some partners can be excluded
Overhead costs/ risk of business borne by all
To exercise Same degree as they would in private affairs
care Responsible for intentional/ negligent action
If it leads to loss of profit/ damages
To maintain Owe fiduciary duty to one another
bona fides Act honestly when representing
Disclose info and avoid conflict of interest
Account for/ distribute profits made
Disclose assets in their possession
Mustn’t do anything to harm/ undermine
Mustn’t keep profit made due to breach of good faith
5. LITIGATION BETWEEN PARTNERS
Actio pro Way to enforce compliance ito agreement
socio Instituted in name of partners
May be instituted during existence without dissolution
Actio Available after dissolution
communi Where partnership is jointly owned in undivided shares
dividundo Use to obtain division of jointly owned property
Prescription of debts not completed until 1 year after
Partner can claim assets upon dissolution only
Upon liquidation – no actios can be taken
6. OBLIGATIONS
Contractual May authorize 3rd party to conclude contracts
They act as both principal/ representative
Mutual mandate
Automatic authority within scope of business
Can be excluded by agreement
Expressly grant authority for transactions outside
For 3rd party to rely on mutual mandate: must be bona fide
Partners can ratify unauthorized contracts
Partners can be held responsible by estoppel
In order to bind partnership, following must be present
Communications of the partner must be indicated
Conduct of the parties must indicate as such.
Knowledge of the third party must indicate as such.
Other surrounding circumstances must be indicated
Doctrine of undisclosed principal
4
