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MRL2601 Assignment: 02
_@--sAnEAE-
Name: Mishanta Narain
Student Number: 68937504
Name of Department and University: Department of Mercantile Law, UNISA.
Course code and name: MRL2601: Entrepreneurial Law
Assignment Unique Number: 652442
Lecturer: Ms J Geldenhuys
Due Date: 31 July 2021
TABLE OF CONTENTS
1) Question 1…………………………………………………………….…………(Pg. 3-4)
2) Question 2……………………………………………………………………….(Pg. 4-5)
3) Bibliography………………………………………………………………..……(Pg. 6)
4) Academic Honesty Declaration………………………………………….……(Pg. 7)
Question 1
In the Companies Act 71 of 2008, Section 8 (3), says that “No association formed for
the purpose of acquisition of gain by the association or it’s members will be a legal
person unless it’s registered as a company”. Distribution is any indirect or direct
property or money transfer of the company, whether out of capital or profits, to
shareholders in their capacity as shareholders. A distribution of all or part of its
profits to shareholders by a company is called Dividend.
Section 46 of the Companies Act regulates distributions and provides the
requirements for distributions. A distribution may be made in circumstances that the
board of directors must authorise the distribution. An acknowledgement of the board
by a way of resolution that it has applied the Solvency and Liquidity test and
conclude reasonably that the company will satisfy the tests immediately after
completion of the proposed distribution, it must appear reasonably that the company
will be able to satisfy the Solvency and Liquidity tests immediately after the
distribution is made. The Solvency and Liquidity tests are set out in Section 4 of the
Companies Act. A company mustn’t make any proposed distributions, unless to an
existing legal obligation of company or court order, the distribution is pursuant.
The relevant distribution must be carried out fully, subject only to subsection (3)
when the board of a company has adopted a resolution observed in subsection (1)
(c). If the distribution viewed in a specific board resolution, existing legal obligation or
court order has not been completed within 120 business days after the board made
the acknowledgement needed by subsection (1)(c) or after a new acknowledgement
being made in terms of this subsection, the Solvency and Liquidity test must be
reconsidered by the board with respect to the remaining distribution to be made
pursuant to the original resolution, obligation or order, and despite any order,
agreement or law to the contrary, the company must not continue or proceed with
any such distribution unless a further resolution as viewed in subsection (1)(c) is
MRL2601 Assignment: 02
_@--sAnEAE-
Name: Mishanta Narain
Student Number: 68937504
Name of Department and University: Department of Mercantile Law, UNISA.
Course code and name: MRL2601: Entrepreneurial Law
Assignment Unique Number: 652442
Lecturer: Ms J Geldenhuys
Due Date: 31 July 2021
TABLE OF CONTENTS
1) Question 1…………………………………………………………….…………(Pg. 3-4)
2) Question 2……………………………………………………………………….(Pg. 4-5)
3) Bibliography………………………………………………………………..……(Pg. 6)
4) Academic Honesty Declaration………………………………………….……(Pg. 7)
Question 1
In the Companies Act 71 of 2008, Section 8 (3), says that “No association formed for
the purpose of acquisition of gain by the association or it’s members will be a legal
person unless it’s registered as a company”. Distribution is any indirect or direct
property or money transfer of the company, whether out of capital or profits, to
shareholders in their capacity as shareholders. A distribution of all or part of its
profits to shareholders by a company is called Dividend.
Section 46 of the Companies Act regulates distributions and provides the
requirements for distributions. A distribution may be made in circumstances that the
board of directors must authorise the distribution. An acknowledgement of the board
by a way of resolution that it has applied the Solvency and Liquidity test and
conclude reasonably that the company will satisfy the tests immediately after
completion of the proposed distribution, it must appear reasonably that the company
will be able to satisfy the Solvency and Liquidity tests immediately after the
distribution is made. The Solvency and Liquidity tests are set out in Section 4 of the
Companies Act. A company mustn’t make any proposed distributions, unless to an
existing legal obligation of company or court order, the distribution is pursuant.
The relevant distribution must be carried out fully, subject only to subsection (3)
when the board of a company has adopted a resolution observed in subsection (1)
(c). If the distribution viewed in a specific board resolution, existing legal obligation or
court order has not been completed within 120 business days after the board made
the acknowledgement needed by subsection (1)(c) or after a new acknowledgement
being made in terms of this subsection, the Solvency and Liquidity test must be
reconsidered by the board with respect to the remaining distribution to be made
pursuant to the original resolution, obligation or order, and despite any order,
agreement or law to the contrary, the company must not continue or proceed with
any such distribution unless a further resolution as viewed in subsection (1)(c) is
