ENTREPRENEURIAL LAW (IURI311) Notes by Mieke Schwartz
079 439 4224
311 Exam Guidelines 2024
Chapter 1
Þ Leave out:
o Purpose of Companies Act
o Application and Interpretation of Companies Act
o New Concepts + New Entities
Chapter 2
Þ Leave out:
o Registration
Chapter 5
Þ Study everything
Chapter 6
Þ Leave out:
o Shareholders Acting other than at a Meeting
Chapter 7
Þ Leave out:
o Committee of Directors
o Rights and Duties of Directors under Common Law
o Personal Financial Interest in Future Contracts and Existing Contracts
o Gihwala v Grancy Property Limited Case
o Delinquency
o Liability of Directors
o General Duty to Disclose Information
o Meetings of Board of Directors
______________________________________________________________________________
Focus on the Following
- Revision slides
- Practice Questions
- Quizzes
- First Test
- Doctrine of Constructive Notice
- Quiz 2 (Test 2) = Concepts, Distinguish (memo on revision slides)
- Types of Profit Companies (table on slides)
The lecturer did mention that the above serve only as a *GUIDELINE*. I therefore do
not take responsibility for what and how you choose to study. I am merely giving you
the information as shared in the class.
1
,ENTREPRENEURIAL LAW (IURI311) Notes by Mieke Schwartz
079 439 4224
CH1 = Introduction to Entrepreneurial Law
Background
• Commencement of “business enterprise” = starts with the type of business enterprise
• Determined by factors: formalities, ownership, control, risk, personal liability, perpetual
succession
• Businesses must be registered with various organisations or departments :
o If there are employees - Department of Labour, SARS, local authorities
o Registration = NOT a requirement for establishing business, but as a result of the
business
• Possible to migrate from one business form to another (5 possible alternative enterprises):
o Sole Proprietorship, Partnership, Trust, Close Corporation, & Company
Sole Proprietorship
• Owner = person himself (e.g. owner’s assets/liabilities are the business’s as well)
• Business is NOT a separate entity)
• Control = owner, over business + its operations
• Capital = owner’s capital (loans, credit from 3rd parties)
• Profits = property of the owner
• Business liabilities = owner liable
• Business unsuccessful = owner’s assets + personal property at risk
• Owner dies = business “dies”
• No formalities to establish a sole proprietorship
Partnership
Combination of more than one sole proprietorship
• Owners = parties conclude partnership contract and contribute to partnership fund
• Contract = express or implied
• No limit on number of partners
• Partners have fiduciary duties towards each other
• Easier capital acquisition = more partners contribute
• Partners control and manage (unless excluded in contract)
• Partners share in net profits and losses + risk of personal liability
• Partnership assets used first to pay creditors = if insufficient then personal assets used
• Partner can leave = partnership as contractual arrangement ends
• Consequences = same as a sole proprietorship
• No formal registration requirements
Trust
“Business trust” = created by founder who executes trust deed
• Trust consists of trustees = operate trust i.t.o trust deed for the benefit of the beneficiaries
• Not a separate entity = trustees are owners of trust property and manage it
• Trustees have strict fiduciary duties in respect of the exercise of their powers
• No limit on number of trustees/beneficiaries
• Trustees NOT liable for liabilities of trust = only trust property used to pay creditors
• Trust is financed with internal + external capital (loans/credit)
• Changes in trustees/beneficiaries = NOT affect existence of the trust (subject to trust deed)
• MUST be registered i.t.o Trust Property Control Act
2
,ENTREPRENEURIAL LAW (IURI311) Notes by Mieke Schwartz
079 439 4224
• Trust under control of Master of the High Court
Close Corporation (CC)
• Entity registered i.t.o the Close Corporations Act, but from the effect date of Companies Act
• No new CC’s can be registered + company cannot be converted into one
• Existing ones can still exist, be acquired, continue trading
• Separate entity from its members
• Change in membership does not affect CC
• Financed through member interest + external capital
• Not successful = members not liable for debts
• Max members = 10 natural persons
• Every member has right to manage CC (subject to optional association agreement)
• Members have fiduciary duties towards CC + co-members
Company
• Various types
• Usually have shareholders + incorporated for profit
• Separate entity with own assets and liabilities
• Capital acquired from shareholders + external capital (loan/credit)
• No restrictions on number of shareholders
• Difference between company + other enterprises = DIVISION between ownership + control:
o = shareholders “own” company and are both the beneficiaries + risk bearers, BUT
they do NOT control the company
o Shareholders elect at least 50% of the board of directors = if not happy with
management they have to dismiss and appoint new directors
• DIRECTORS have fiduciary duties towards company as separate legal entity
o Shareholders do NOT have fiduciary duties towards co-shareholders or the company
3
, ENTREPRENEURIAL LAW (IURI311) Notes by Mieke Schwartz
079 439 4224
CH2 = Legal Personality, Types of Companies
LEGAL PERSONALITY
Analyse the Concept of Legal Personality
• Law determines legal subjects (legal “juristic” person) + bearer of rights + duties:
o Natural persons
o Certain other entities
Natural person = legal subject who has certain rights in respect of a legal object:
1. Real rights (right to corporeal e.g. ownership)
2. Personal rights (claim something from another legal subject based on contract/delict)
3. Intellectual property rights (rights to physical embodiment of the intellect of a legal
subject e.g. copyright)
4. Personality rights (right to privacy, dignity, fame)
• Natural person = capacity + power to do everything allowed by the law
o Act outside of this capacity = ultra vires + void
o Can appoint agent to act on his behalf
Ultra vires (“beyond § Contract concluded between 3rd party and authorised agent (authority given
the power”) by natural person as principle) = comes into existence between principal + 3rd
Describes an act
that requires legal party
authority but is § Principle cannot give authority to agent to do something on his behalf that is
done without it
ultra vires the principle (i.e.beyond the power of the principle)
Certain other entities
• Legal person can come into existence by various means
• Legal person has same capacity and powers as natural person, EXCEPT for those things
that it cannot do because it is not a natural person, such as getting married
• Capacity of legal person can be restricted by:
1. Documents creating the legal person
2. The Act that bestows legal personality
• Acts performed outside of this capacity = ultra vires, but not necessarily void
o Enabling Act can provide that those actions are valid under certain circumstances
How is legal personality obtained i.e How legal person come into existence:
Specific Act
• Certain Acts expressly provide that entity formed i.t.o the Act has legal personality
o E.g. Uni. of Pretoria (Private Act) provides that UP is legal person with certain
restrictions on its capacity and powers
General Enabling Act
• Certain Acts do not give legal personality to specific entity, but to all entities that comply
with requirements of that Act
o E.g. Companies Act
4
079 439 4224
311 Exam Guidelines 2024
Chapter 1
Þ Leave out:
o Purpose of Companies Act
o Application and Interpretation of Companies Act
o New Concepts + New Entities
Chapter 2
Þ Leave out:
o Registration
Chapter 5
Þ Study everything
Chapter 6
Þ Leave out:
o Shareholders Acting other than at a Meeting
Chapter 7
Þ Leave out:
o Committee of Directors
o Rights and Duties of Directors under Common Law
o Personal Financial Interest in Future Contracts and Existing Contracts
o Gihwala v Grancy Property Limited Case
o Delinquency
o Liability of Directors
o General Duty to Disclose Information
o Meetings of Board of Directors
______________________________________________________________________________
Focus on the Following
- Revision slides
- Practice Questions
- Quizzes
- First Test
- Doctrine of Constructive Notice
- Quiz 2 (Test 2) = Concepts, Distinguish (memo on revision slides)
- Types of Profit Companies (table on slides)
The lecturer did mention that the above serve only as a *GUIDELINE*. I therefore do
not take responsibility for what and how you choose to study. I am merely giving you
the information as shared in the class.
1
,ENTREPRENEURIAL LAW (IURI311) Notes by Mieke Schwartz
079 439 4224
CH1 = Introduction to Entrepreneurial Law
Background
• Commencement of “business enterprise” = starts with the type of business enterprise
• Determined by factors: formalities, ownership, control, risk, personal liability, perpetual
succession
• Businesses must be registered with various organisations or departments :
o If there are employees - Department of Labour, SARS, local authorities
o Registration = NOT a requirement for establishing business, but as a result of the
business
• Possible to migrate from one business form to another (5 possible alternative enterprises):
o Sole Proprietorship, Partnership, Trust, Close Corporation, & Company
Sole Proprietorship
• Owner = person himself (e.g. owner’s assets/liabilities are the business’s as well)
• Business is NOT a separate entity)
• Control = owner, over business + its operations
• Capital = owner’s capital (loans, credit from 3rd parties)
• Profits = property of the owner
• Business liabilities = owner liable
• Business unsuccessful = owner’s assets + personal property at risk
• Owner dies = business “dies”
• No formalities to establish a sole proprietorship
Partnership
Combination of more than one sole proprietorship
• Owners = parties conclude partnership contract and contribute to partnership fund
• Contract = express or implied
• No limit on number of partners
• Partners have fiduciary duties towards each other
• Easier capital acquisition = more partners contribute
• Partners control and manage (unless excluded in contract)
• Partners share in net profits and losses + risk of personal liability
• Partnership assets used first to pay creditors = if insufficient then personal assets used
• Partner can leave = partnership as contractual arrangement ends
• Consequences = same as a sole proprietorship
• No formal registration requirements
Trust
“Business trust” = created by founder who executes trust deed
• Trust consists of trustees = operate trust i.t.o trust deed for the benefit of the beneficiaries
• Not a separate entity = trustees are owners of trust property and manage it
• Trustees have strict fiduciary duties in respect of the exercise of their powers
• No limit on number of trustees/beneficiaries
• Trustees NOT liable for liabilities of trust = only trust property used to pay creditors
• Trust is financed with internal + external capital (loans/credit)
• Changes in trustees/beneficiaries = NOT affect existence of the trust (subject to trust deed)
• MUST be registered i.t.o Trust Property Control Act
2
,ENTREPRENEURIAL LAW (IURI311) Notes by Mieke Schwartz
079 439 4224
• Trust under control of Master of the High Court
Close Corporation (CC)
• Entity registered i.t.o the Close Corporations Act, but from the effect date of Companies Act
• No new CC’s can be registered + company cannot be converted into one
• Existing ones can still exist, be acquired, continue trading
• Separate entity from its members
• Change in membership does not affect CC
• Financed through member interest + external capital
• Not successful = members not liable for debts
• Max members = 10 natural persons
• Every member has right to manage CC (subject to optional association agreement)
• Members have fiduciary duties towards CC + co-members
Company
• Various types
• Usually have shareholders + incorporated for profit
• Separate entity with own assets and liabilities
• Capital acquired from shareholders + external capital (loan/credit)
• No restrictions on number of shareholders
• Difference between company + other enterprises = DIVISION between ownership + control:
o = shareholders “own” company and are both the beneficiaries + risk bearers, BUT
they do NOT control the company
o Shareholders elect at least 50% of the board of directors = if not happy with
management they have to dismiss and appoint new directors
• DIRECTORS have fiduciary duties towards company as separate legal entity
o Shareholders do NOT have fiduciary duties towards co-shareholders or the company
3
, ENTREPRENEURIAL LAW (IURI311) Notes by Mieke Schwartz
079 439 4224
CH2 = Legal Personality, Types of Companies
LEGAL PERSONALITY
Analyse the Concept of Legal Personality
• Law determines legal subjects (legal “juristic” person) + bearer of rights + duties:
o Natural persons
o Certain other entities
Natural person = legal subject who has certain rights in respect of a legal object:
1. Real rights (right to corporeal e.g. ownership)
2. Personal rights (claim something from another legal subject based on contract/delict)
3. Intellectual property rights (rights to physical embodiment of the intellect of a legal
subject e.g. copyright)
4. Personality rights (right to privacy, dignity, fame)
• Natural person = capacity + power to do everything allowed by the law
o Act outside of this capacity = ultra vires + void
o Can appoint agent to act on his behalf
Ultra vires (“beyond § Contract concluded between 3rd party and authorised agent (authority given
the power”) by natural person as principle) = comes into existence between principal + 3rd
Describes an act
that requires legal party
authority but is § Principle cannot give authority to agent to do something on his behalf that is
done without it
ultra vires the principle (i.e.beyond the power of the principle)
Certain other entities
• Legal person can come into existence by various means
• Legal person has same capacity and powers as natural person, EXCEPT for those things
that it cannot do because it is not a natural person, such as getting married
• Capacity of legal person can be restricted by:
1. Documents creating the legal person
2. The Act that bestows legal personality
• Acts performed outside of this capacity = ultra vires, but not necessarily void
o Enabling Act can provide that those actions are valid under certain circumstances
How is legal personality obtained i.e How legal person come into existence:
Specific Act
• Certain Acts expressly provide that entity formed i.t.o the Act has legal personality
o E.g. Uni. of Pretoria (Private Act) provides that UP is legal person with certain
restrictions on its capacity and powers
General Enabling Act
• Certain Acts do not give legal personality to specific entity, but to all entities that comply
with requirements of that Act
o E.g. Companies Act
4
