MERCANTILE LAW
292
,TABLE OF CONTENTS:
TERM 1:
- Types of entities
- Types of companies
- Legal Personality
- Business Trusts
- Beneficiaries
- Partnerships
- Close Corporations
TERM 2:
- Types of Companies
- Formation of Companies
- Memorandum of Incorporation
- Shareholders Meetings
- Company governance and board of directors
TERM 3:
- Company Financing
- Registration and Transferring of Securities
- Offers to the public
- Distributions
- Financial Assistances
TERM 4:
- Company Groups
, TYPES OF ENTITIES
Revision of Term 1
Types of Entities:
1. Sole Proprietorship
- Natural person
- No juristic personality
- Little legislation governing these entities
- Little financing Options
2. Partnerships
- Agreement 2 or more people
- Parties make contributions
o Money
o Time
o Skill
- Intention: to make a profit
- NO Juristic Personality
o Cannot be insolvent will be liquidated instead
- In certain aspects/circumstances can be legal personality
- Can be passed on – Succession
3. Close Corporations
- 1 – 10 Members
o Must be NP or some cases Trusts
- Cannot create CC anymore – 21 May 2011
o Can continue Existing
- Has Juristic Personality
- NOT number of shares/shareholders RATHER referred to as members Interest
o Expressed as % owned of entity
- Regulated by Close Corporations Act
4. Private Company
- A profit company that:
o Is not public, personal liability or state owned company and satisfies criteria in
S8(2)(b)
§ Prohibits offering of securities to public [right of pre-emption]
§ Restricts transferability of securities [discretion on directors to refuse
transfer]
5. Business Trust
- 3 Parties:
o Founder, Beneficiary, Trustee
- No juristic personality
- Limited Liability
o Except where court rules it is juristic person
,TYPES OF COMPANIES
à separate legal personality
à can be disregarded if company used as an alter ego
Company
- Cilliers and Benade à “an association of persons that co-operate for purpose of
profit”
o Problem à not all companies are for profit and little emphasis on Juristic Person
§ Better definition in act
- Juristic Personality
- For Gain/Profit or for another public benefit
-
1. Private Company
§ (Pty) Ltd
- A profit company that:
o Is not public, personal liability or state owned company and satisfies criteria in
S8(2)(b)
§ Prohibits offering of securities to public
§ Restricts transferability of securities
- Has Juristic Personality
- 1973 act à restricted to 50 Members
- 2008 act à no restriction to number of members
o More flexible and easy to register
2. Public Company
§ Ltd
- Widely-held entity à any number of shareholders and shares are traded freely
- Can have any number of shareholders
- At least 3 directors
3. Personal Liability Company
§ Inc.
- Meets criteria of Private Company
- Directors and Past directors jointly and severally liable, together with company
4. State Owned Company
§ SOC Ltd
- Eskom, Postnet
5. Non-Profit Company
§ NPC
- Incorporated for Public Benefit
- Income and Property not distributable
,Common Law:
- Body of legal rules that have been made by judges as they issue rulings on cases, as
opposed to rules and laws made by legislature or in official statutes
- Partly of English and Roman-Dutch Origin
Rights of Legal Subjects
Real Right à Right to property and ownership
Personal Right à Right to claim something from either legal subject on Contractual or
Delictual Basis (e.g Owe Money)
Personality Rights à right to privacy and dignity
Intellectual Property à copy right / trade mark
Juristic Person / Legal Person
- This JP has the capacity and powers
- However they can be restricted because they are not NP
- Also includes:
o A foreign company
o A trust, irrespective of whether or not it was established within or outside the
republic
- Section 19)1):
o From date and time that company is registered, the company is a Juristic Person
(continues until name removed)
à JP is a legal subject which can be bearer of its own rights and obligations and which
exists independently from its members
Consequences of Juristic Person:
- Distinct entity
- Limited liability
- Assets and Profits
- Perpetual succession
- Contracts
- Personality rights and constitutional rights
HOW DOES COMPANY ACQUIRE LEGAL PERSONALITY?
1. Specific Legislation
2. General Enabling Legislation
3. Common Law
If through common law:
a. Does entity conduct itself like a legal person?
b. Does the entity’s constitution have the following elements:
i. Perpetual succession
ii. Entity owns assets
iii. Lawful purpose
, CCCC EBS à 4x C ebs
Reasons For New Act
1. Capital Maintenance
o Principles of Solvency replaced capital maintenance
2. Economic Development
o Needed to stimulate economic growth + entrepreneurship
3. Business Rescue
o 1973 made provisions for BR impractical
4. Constitution
o Need to bring 1973 act inline
o Need to make formation of a company a right to all NOT a privilege
5. Corporate Governance
o Higher standard of corporate governance, corporate social responsibility and
ethics
o Benefit of Investors and Stakeholders
6. Criminal Sanctions
o Problems with enforcement in 1973 ac
7. Simplifications
- 1973 very complex
Reform and Interested Parties
- Classic shareholder-orientated model
- Enlightened Shareholder value approach
- Pluralist Approach – looks at benefits of other Stakeholders
Institutions of Companies Act:
1. Companies and Intellectual Property Commission
à CIPC
- Independent and impartial organ with Juristic Personality
- Duties of Commission: s187
o Register and deregister companies
o Receiving and investigating complaints
o Issuing and enforcing compliance notice
o Making recommendations to FRS council
2. Companies Tribunal
- Independent and impartial organ with Juristic Personality
- Functions: s195
o Adjudicate disputes
o Assist in resolution of disputes
o Alternative to court à cheaper
- Decisions are binding on commission, unless reviewed or appealed
3. Specialist Committees
- Advisory role à mostly on development and law
- Appointed for specific purpose
-
292
,TABLE OF CONTENTS:
TERM 1:
- Types of entities
- Types of companies
- Legal Personality
- Business Trusts
- Beneficiaries
- Partnerships
- Close Corporations
TERM 2:
- Types of Companies
- Formation of Companies
- Memorandum of Incorporation
- Shareholders Meetings
- Company governance and board of directors
TERM 3:
- Company Financing
- Registration and Transferring of Securities
- Offers to the public
- Distributions
- Financial Assistances
TERM 4:
- Company Groups
, TYPES OF ENTITIES
Revision of Term 1
Types of Entities:
1. Sole Proprietorship
- Natural person
- No juristic personality
- Little legislation governing these entities
- Little financing Options
2. Partnerships
- Agreement 2 or more people
- Parties make contributions
o Money
o Time
o Skill
- Intention: to make a profit
- NO Juristic Personality
o Cannot be insolvent will be liquidated instead
- In certain aspects/circumstances can be legal personality
- Can be passed on – Succession
3. Close Corporations
- 1 – 10 Members
o Must be NP or some cases Trusts
- Cannot create CC anymore – 21 May 2011
o Can continue Existing
- Has Juristic Personality
- NOT number of shares/shareholders RATHER referred to as members Interest
o Expressed as % owned of entity
- Regulated by Close Corporations Act
4. Private Company
- A profit company that:
o Is not public, personal liability or state owned company and satisfies criteria in
S8(2)(b)
§ Prohibits offering of securities to public [right of pre-emption]
§ Restricts transferability of securities [discretion on directors to refuse
transfer]
5. Business Trust
- 3 Parties:
o Founder, Beneficiary, Trustee
- No juristic personality
- Limited Liability
o Except where court rules it is juristic person
,TYPES OF COMPANIES
à separate legal personality
à can be disregarded if company used as an alter ego
Company
- Cilliers and Benade à “an association of persons that co-operate for purpose of
profit”
o Problem à not all companies are for profit and little emphasis on Juristic Person
§ Better definition in act
- Juristic Personality
- For Gain/Profit or for another public benefit
-
1. Private Company
§ (Pty) Ltd
- A profit company that:
o Is not public, personal liability or state owned company and satisfies criteria in
S8(2)(b)
§ Prohibits offering of securities to public
§ Restricts transferability of securities
- Has Juristic Personality
- 1973 act à restricted to 50 Members
- 2008 act à no restriction to number of members
o More flexible and easy to register
2. Public Company
§ Ltd
- Widely-held entity à any number of shareholders and shares are traded freely
- Can have any number of shareholders
- At least 3 directors
3. Personal Liability Company
§ Inc.
- Meets criteria of Private Company
- Directors and Past directors jointly and severally liable, together with company
4. State Owned Company
§ SOC Ltd
- Eskom, Postnet
5. Non-Profit Company
§ NPC
- Incorporated for Public Benefit
- Income and Property not distributable
,Common Law:
- Body of legal rules that have been made by judges as they issue rulings on cases, as
opposed to rules and laws made by legislature or in official statutes
- Partly of English and Roman-Dutch Origin
Rights of Legal Subjects
Real Right à Right to property and ownership
Personal Right à Right to claim something from either legal subject on Contractual or
Delictual Basis (e.g Owe Money)
Personality Rights à right to privacy and dignity
Intellectual Property à copy right / trade mark
Juristic Person / Legal Person
- This JP has the capacity and powers
- However they can be restricted because they are not NP
- Also includes:
o A foreign company
o A trust, irrespective of whether or not it was established within or outside the
republic
- Section 19)1):
o From date and time that company is registered, the company is a Juristic Person
(continues until name removed)
à JP is a legal subject which can be bearer of its own rights and obligations and which
exists independently from its members
Consequences of Juristic Person:
- Distinct entity
- Limited liability
- Assets and Profits
- Perpetual succession
- Contracts
- Personality rights and constitutional rights
HOW DOES COMPANY ACQUIRE LEGAL PERSONALITY?
1. Specific Legislation
2. General Enabling Legislation
3. Common Law
If through common law:
a. Does entity conduct itself like a legal person?
b. Does the entity’s constitution have the following elements:
i. Perpetual succession
ii. Entity owns assets
iii. Lawful purpose
, CCCC EBS à 4x C ebs
Reasons For New Act
1. Capital Maintenance
o Principles of Solvency replaced capital maintenance
2. Economic Development
o Needed to stimulate economic growth + entrepreneurship
3. Business Rescue
o 1973 made provisions for BR impractical
4. Constitution
o Need to bring 1973 act inline
o Need to make formation of a company a right to all NOT a privilege
5. Corporate Governance
o Higher standard of corporate governance, corporate social responsibility and
ethics
o Benefit of Investors and Stakeholders
6. Criminal Sanctions
o Problems with enforcement in 1973 ac
7. Simplifications
- 1973 very complex
Reform and Interested Parties
- Classic shareholder-orientated model
- Enlightened Shareholder value approach
- Pluralist Approach – looks at benefits of other Stakeholders
Institutions of Companies Act:
1. Companies and Intellectual Property Commission
à CIPC
- Independent and impartial organ with Juristic Personality
- Duties of Commission: s187
o Register and deregister companies
o Receiving and investigating complaints
o Issuing and enforcing compliance notice
o Making recommendations to FRS council
2. Companies Tribunal
- Independent and impartial organ with Juristic Personality
- Functions: s195
o Adjudicate disputes
o Assist in resolution of disputes
o Alternative to court à cheaper
- Decisions are binding on commission, unless reviewed or appealed
3. Specialist Committees
- Advisory role à mostly on development and law
- Appointed for specific purpose
-
