UNIVERSITY OF SOUTH AFRICA (UNISA)
College of Law
⋄
Entrepreneurial Law
Assignment 2 — Semester 2, 2026
⋄
Module Code: MRL2601
Module Name: Entrepreneurial Law
Assignment No.: Assignment 2
Semester: Semester 2, 2026
Total Marks: 10
Submitted in partial fulfilment of the requirements for Entrepreneurial Law
at the University of South Africa.
, UNISA | MRL2601 Entrepreneurial Law – Assignment 2
Question 1: Company Capacity, Representative Authority and the Turquand Rule
The dispute between Abahlali (Pty) Ltd and Nawana raises two separate legal questions
that are easy to conflate: whether the company had the capacity to buy a beach house at
all, and whether Gadifele had the authority to represent the company in doing so. Under the
Companies Act 71 of 2008, capacity and authority are governed by different provisions and
produce different answers on these facts.1
1.1 The Capacity Question: The Main Object Restriction
Before 2008, a company’s capacity to contract was limited by the objects clause in its con-
stitutive documents; an act falling outside the stated objects was ultra vires and void. The
Companies Act 71 of 2008 abolished this doctrine for outsiders. Section 19(1)(b) gives a com-
pany, from the moment of incorporation, the legal capacity and powers of a natural person,
irrespective of any limitation, restriction or qualification in its Memorandum of Incorpora-
tion (MOI), except to the extent that the MOI itself provides otherwise for a ring-fenced com-
pany.2 Section 20(1) reinforces this: no act of a company is void merely because the com-
pany lacked capacity or acted beyond its stated main object, although a director who caused
the company to act beyond its capacity may still face internal consequences, such as a claim
for damages or an application by shareholders to restrain the act before it is concluded.3
Abahlali’s MOI states that its main object is manufacturing furniture; a beach house has noth-
ing to do with that object. Under the old common law this would have been decisive. Under
the current Act it is not. The company cannot point to the mismatch between its main ob-
ject and the beach house purchase as a ground for saying the contract is void, because the
doctrine that would once have permitted this, the ultra vires doctrine, no longer protects the
company against a third party who was not a party to any internal wrongdoing.4 Abahlali
therefore cannot rely on the main-object limitation in its MOI to escape liability on the ground
of capacity.
1
Companies Act 71 of 2008, ss 19–20.
2
Companies Act 71 of 2008, s 19(1)(b).
3
Companies Act 71 of 2008, s 20(1)–(5).
4
Constitution of the Republic of South Africa, 1996 does not bear on this point directly, but see generally FHI
Cassim, MF Cassim, R Cassim, R Jooste, J Shev and J Yeats, Contemporary Company Law (2nd edn, Juta 2012)
154–157 on the abolition of constructive notice and the doctrine of ultra vires.
Page 1 of 10
College of Law
⋄
Entrepreneurial Law
Assignment 2 — Semester 2, 2026
⋄
Module Code: MRL2601
Module Name: Entrepreneurial Law
Assignment No.: Assignment 2
Semester: Semester 2, 2026
Total Marks: 10
Submitted in partial fulfilment of the requirements for Entrepreneurial Law
at the University of South Africa.
, UNISA | MRL2601 Entrepreneurial Law – Assignment 2
Question 1: Company Capacity, Representative Authority and the Turquand Rule
The dispute between Abahlali (Pty) Ltd and Nawana raises two separate legal questions
that are easy to conflate: whether the company had the capacity to buy a beach house at
all, and whether Gadifele had the authority to represent the company in doing so. Under the
Companies Act 71 of 2008, capacity and authority are governed by different provisions and
produce different answers on these facts.1
1.1 The Capacity Question: The Main Object Restriction
Before 2008, a company’s capacity to contract was limited by the objects clause in its con-
stitutive documents; an act falling outside the stated objects was ultra vires and void. The
Companies Act 71 of 2008 abolished this doctrine for outsiders. Section 19(1)(b) gives a com-
pany, from the moment of incorporation, the legal capacity and powers of a natural person,
irrespective of any limitation, restriction or qualification in its Memorandum of Incorpora-
tion (MOI), except to the extent that the MOI itself provides otherwise for a ring-fenced com-
pany.2 Section 20(1) reinforces this: no act of a company is void merely because the com-
pany lacked capacity or acted beyond its stated main object, although a director who caused
the company to act beyond its capacity may still face internal consequences, such as a claim
for damages or an application by shareholders to restrain the act before it is concluded.3
Abahlali’s MOI states that its main object is manufacturing furniture; a beach house has noth-
ing to do with that object. Under the old common law this would have been decisive. Under
the current Act it is not. The company cannot point to the mismatch between its main ob-
ject and the beach house purchase as a ground for saying the contract is void, because the
doctrine that would once have permitted this, the ultra vires doctrine, no longer protects the
company against a third party who was not a party to any internal wrongdoing.4 Abahlali
therefore cannot rely on the main-object limitation in its MOI to escape liability on the ground
of capacity.
1
Companies Act 71 of 2008, ss 19–20.
2
Companies Act 71 of 2008, s 19(1)(b).
3
Companies Act 71 of 2008, s 20(1)–(5).
4
Constitution of the Republic of South Africa, 1996 does not bear on this point directly, but see generally FHI
Cassim, MF Cassim, R Cassim, R Jooste, J Shev and J Yeats, Contemporary Company Law (2nd edn, Juta 2012)
154–157 on the abolition of constructive notice and the doctrine of ultra vires.
Page 1 of 10
