BER 220 Chapter 24
28 July 2024 18:42
CHAPTER 24: INTRODUCTION TO COMPANY LAW:
INTRODUCTION:
• Company-serve as business entities that facilitate profit generation and support national
economic growth.
Example: A tech startup creates innovative software, generating profits while contributing
to local job creation.
Companies can be established for non-profit purposes, unlike partnerships that typically focus on
profit.
Example: A charity organization is formed as a non-profit company to provide community
services.
Entrepreneurs prefer companies due to the separate legal identity granted upon incorporation.
Example: A business owner incorporates their company, protecting personal assets from
business liabilities.
Shareholders enjoy the limited liability and tax benefits (28% tax charge).
The Companies Act 71 of 2008 regulates how companies operate and engage with external
parties and the Acts before were not flexible and complex.
Example: A company must follow the Companies Act when forming partnerships or
contracts with suppliers.
• Despite its issues, the Companies Act is recognized for its flexibility and simplicity.
Example: Business owners appreciate the ease of compliance with the Companies Act
when starting new ventures.
WHAT IS A COMPANY:
Section 1 of the Companies Act 71 of 2008 defines:
• Company-a legal entity established under the Companies Act, recognized as a juristic person.
Example: ABC Ltd. was formed under the Companies Act, allowing it to enter contracts.
• Companies may also be established under prior legislation before the current Companies Act
was enacted.
Example: XYZ Pty. was created under the previous Companies Act, operating legally
before the new regulations.
• Close corporations (CC) registered under the Close Corporations Act 69 of 1984 can convert
into companies.
Example: DEF CC transitioned into DEF Ltd., gaining the benefits of a corporate structure.
• A company is formed when entrepreneurs unite to create a business and accompany each other.
Example: Three friends start a tech company to develop mobile apps.
• Companies aim to generate profits or support a non-profit cause even at non-profit ventures.
Example: A non-profit company provides free meals to low-income families.
• Some companies focus on improving society through their activities (e.g. using sports to reform
the youth).
BER 220 Page 1
, the youth).
Example: A company uses sports programs to help at-risk youth.
LEGAL PERSONALITY (CHARACTERISTICS OF THE COMPANY):
• After fulfilling registration requirements, entrepreneurs receive a certificate, marking the
company's official incorporation.
Example: Once Jane and her partners submitted all documents, they received their
company registration certificate.
• This signifies that the company is officially established and recognized as a legal entity and
comes into life.
Example: The moment the certificate was issued, their startup was legally recognized as a
business.
• The Companies and Intellectual Property Commission (CIPC) provides an incorporation
certificate and registration number confirming the company’s legal existence.
Example: The CIPC issued a registration number, validating that their company was
legally established.
• Registered company acquires separate legal personality (separate juristic personality) upon
certificate issuance.
• Company exists separately from its founders/shareholders as a distinct entity.
• Company is a separate legal person, though not natural, requiring representatives.
• Company's separate legal personality attracts entrepreneurs to choose this form.
Example: Sarah, an entrepreneur, chooses to register her new bakery business as a
company because the separate legal personality protects her personal assets from
business liabilities.
SEPARATE (JURISTIC) LEGAL PERSONALITY HAS SEVERAL PERTINENT
IMPLICATIONS:
1. Bearer of rights and duties-a company holds specific rights and responsibilities, distinct from its
shareholders and employees.
Example: A company can enter contracts, hire employees, and be accountable for its
actions.
2. Assets are owned by company-the company itself owns its assets, not the individual
shareholders or directors.
Example: A company owns its office building, equipment, and inventory, separate from
shareholders’ personal assets.
3. Company is liable to their own debts-a company has the legal capacity to initiate or defend legal
actions under its name.
Example: If a supplier breaches a contract, the company can sue the supplier for
damages.
4. Shareholders enjoy limited liability-shareholders are only financially responsible for the
company’s debts up to their investment amount.
Example: If a company fails, shareholders lose their investment but are not personally
liable for debts.
EXPLANATION OF SEPARATE LEGAL PERSONALITY:
BER 220 Page 2
28 July 2024 18:42
CHAPTER 24: INTRODUCTION TO COMPANY LAW:
INTRODUCTION:
• Company-serve as business entities that facilitate profit generation and support national
economic growth.
Example: A tech startup creates innovative software, generating profits while contributing
to local job creation.
Companies can be established for non-profit purposes, unlike partnerships that typically focus on
profit.
Example: A charity organization is formed as a non-profit company to provide community
services.
Entrepreneurs prefer companies due to the separate legal identity granted upon incorporation.
Example: A business owner incorporates their company, protecting personal assets from
business liabilities.
Shareholders enjoy the limited liability and tax benefits (28% tax charge).
The Companies Act 71 of 2008 regulates how companies operate and engage with external
parties and the Acts before were not flexible and complex.
Example: A company must follow the Companies Act when forming partnerships or
contracts with suppliers.
• Despite its issues, the Companies Act is recognized for its flexibility and simplicity.
Example: Business owners appreciate the ease of compliance with the Companies Act
when starting new ventures.
WHAT IS A COMPANY:
Section 1 of the Companies Act 71 of 2008 defines:
• Company-a legal entity established under the Companies Act, recognized as a juristic person.
Example: ABC Ltd. was formed under the Companies Act, allowing it to enter contracts.
• Companies may also be established under prior legislation before the current Companies Act
was enacted.
Example: XYZ Pty. was created under the previous Companies Act, operating legally
before the new regulations.
• Close corporations (CC) registered under the Close Corporations Act 69 of 1984 can convert
into companies.
Example: DEF CC transitioned into DEF Ltd., gaining the benefits of a corporate structure.
• A company is formed when entrepreneurs unite to create a business and accompany each other.
Example: Three friends start a tech company to develop mobile apps.
• Companies aim to generate profits or support a non-profit cause even at non-profit ventures.
Example: A non-profit company provides free meals to low-income families.
• Some companies focus on improving society through their activities (e.g. using sports to reform
the youth).
BER 220 Page 1
, the youth).
Example: A company uses sports programs to help at-risk youth.
LEGAL PERSONALITY (CHARACTERISTICS OF THE COMPANY):
• After fulfilling registration requirements, entrepreneurs receive a certificate, marking the
company's official incorporation.
Example: Once Jane and her partners submitted all documents, they received their
company registration certificate.
• This signifies that the company is officially established and recognized as a legal entity and
comes into life.
Example: The moment the certificate was issued, their startup was legally recognized as a
business.
• The Companies and Intellectual Property Commission (CIPC) provides an incorporation
certificate and registration number confirming the company’s legal existence.
Example: The CIPC issued a registration number, validating that their company was
legally established.
• Registered company acquires separate legal personality (separate juristic personality) upon
certificate issuance.
• Company exists separately from its founders/shareholders as a distinct entity.
• Company is a separate legal person, though not natural, requiring representatives.
• Company's separate legal personality attracts entrepreneurs to choose this form.
Example: Sarah, an entrepreneur, chooses to register her new bakery business as a
company because the separate legal personality protects her personal assets from
business liabilities.
SEPARATE (JURISTIC) LEGAL PERSONALITY HAS SEVERAL PERTINENT
IMPLICATIONS:
1. Bearer of rights and duties-a company holds specific rights and responsibilities, distinct from its
shareholders and employees.
Example: A company can enter contracts, hire employees, and be accountable for its
actions.
2. Assets are owned by company-the company itself owns its assets, not the individual
shareholders or directors.
Example: A company owns its office building, equipment, and inventory, separate from
shareholders’ personal assets.
3. Company is liable to their own debts-a company has the legal capacity to initiate or defend legal
actions under its name.
Example: If a supplier breaches a contract, the company can sue the supplier for
damages.
4. Shareholders enjoy limited liability-shareholders are only financially responsible for the
company’s debts up to their investment amount.
Example: If a company fails, shareholders lose their investment but are not personally
liable for debts.
EXPLANATION OF SEPARATE LEGAL PERSONALITY:
BER 220 Page 2
