NOTES
,Part 1: Introductory Topics ..................................................................................................10
Societal Context of the Corporation ........................................................................................ 10
Legal Status and Juristic Personality ................................................................................10
Why Incorporate a Business? ................................................................................................. 10
What are the Benefits? .......................................................................................................... 10
What to Consider When Incorporating? .................................................................................. 10
Fundamental Concepts ...................................................................................................11
Legal Status ........................................................................................................................... 11
Juristic Personality ................................................................................................................. 11
Principles of Agency ............................................................................................................... 11
Fiduciary Law ......................................................................................................................... 11
Juristic Persons ...............................................................................................................12
Development and History....................................................................................................... 12
Juristic Person.................................................................................................................12
Enabling Legislation ............................................................................................................... 12
Common Law Juristic Persons ................................................................................................. 12
Company as a Juristic Person .................................................................................................. 13
Features of a Separate Juristic Personality .............................................................................. 13
Principles of Agency ........................................................................................................14
Nature of Commercial Agency .........................................................................................15
Implied Terms of the Contract of Agency .........................................................................15
Duties of the Agent ................................................................................................................ 15
Duties of the Principal ............................................................................................................ 15
The Agency Relationship .................................................................................................16
Commercial Agency ........................................................................................................16
Commercial Advantages of Empowered Agents ...................................................................... 16
Authority ........................................................................................................................16
How does an Agent Acquire Authority? .................................................................................. 17
....................................................................................................18
.............................................................................................. 18
Fiduciary Law .................................................................................................................20
What is a Fiduciary? ............................................................................................................... 20
..................................................................................... 20
Establishing a Fiduciary Relationship ...................................................................................... 21
Examples of Fiduciary Duties .................................................................................................. 21
2
, Examples of Fiduciaries .......................................................................................................... 22
Principles of Delict ..........................................................................................................22
.......................................................................................................... 22
...................................................................................................... 22
Part 2: Unincorporated Firms ..........................................................................................25
The Sole Proprietor .........................................................................................................25
The Partnership ..............................................................................................................25
Nature of a Partnership .......................................................................................................... 25
Requirements for a Valid Partnership Agreement ................................................................... 25
Definition of a Partnership: Elements ..................................................................................... 26
Legal Nature of a Partnership ................................................................................................. 27
The Partnership Fund ......................................................................................................27
Rights and Duties of Partners ..........................................................................................28
Rights of the Partners............................................................................................................. 28
Duties of the Partners ............................................................................................................ 28
Rights and Duties of Partners ................................................................................................. 29
Extraordinary Partnerships .............................................................................................30
Incorporated Partnerships ..............................................................................................30
Liability to Third Parties ..................................................................................................31
Incidence ............................................................................................................................... 31
Limitations............................................................................................................................. 31
Liability to Third Parties: Authority..................................................................................31
Implied Authority................................................................................................................... 32
Liability to Third Parties: Variations ................................................................................32
Criminal Liability .................................................................................................................... 32
Civil Proceedings .................................................................................................................... 33
Dissolution of the Partnership .........................................................................................33
Causes of Dissolution ............................................................................................................. 33
Consequences of Dissolution .................................................................................................. 34
Class Exercise: Partnerships ............................................................................................35
Spot Test 1 Answers ........................................................................................................38
Business Trusts ...............................................................................................................38
Legal Nature of a Trust ........................................................................................................... 38
Parties to a Trust.................................................................................................................... 39
Types of Trusts....................................................................................................................... 39
3
, Creation of a Trust ................................................................................................................. 39
Duties of the Trustee.............................................................................................................. 40
Legal Position of the Beneficiary, Generally ............................................................................ 40
The Business Trust ..........................................................................................................40
Part 3: Pre-Incorporation Matters ...................................................................................42
The Promoter ........................................................................................................................ 42
Pre-Incorporation Contracts ............................................................................................42
Pre-Incorporation Contracts: Options ..................................................................................... 43
Section 21: Requirements................................................................................................43
Liability of Promoter Under Section 21 ................................................................................... 44
Entitlements of Promoter Under Section 21 ............................................................................ 44
Class Exercise 2 ...............................................................................................................44
Part 4: Regulatory framework.........................................................................................45
Overview ............................................................................................................................... 45
Defining Corporate Governance ......................................................................................46
Defining Corporate Governance ............................................................................................. 46
Good Corporate Governance is Not an End in Itself ................................................................. 47
................................................................................................47
Pluralist Approach.................................................................................................................. 47
Enlightened Shareholder Value Approach ............................................................................... 47
Relevant Sources of Law .................................................................................................48
The Companies Act 2008: Underlying Principles ...............................................................48
The Companies Act 2008: Structure .................................................................................49
The King Codes: Introduction ..........................................................................................49
Best Principles (and Practices) ................................................................................................ 49
............................................................................................. 50
King IV............................................................................................................................50
The Financial Markets Act ...............................................................................................51
Objects of Act ........................................................................................................................ 51
Offences Under Market Abuse (Chapter X) [penalties: s 109]................................................... 51
1. Insider Trading ........................................................................................................51
What is insider trading? ......................................................................................................... 51
......................................................................52
..........................................................................................52
Liability for Insider Trading ..................................................................................................... 53
4
,Part 1: Introductory Topics ..................................................................................................10
Societal Context of the Corporation ........................................................................................ 10
Legal Status and Juristic Personality ................................................................................10
Why Incorporate a Business? ................................................................................................. 10
What are the Benefits? .......................................................................................................... 10
What to Consider When Incorporating? .................................................................................. 10
Fundamental Concepts ...................................................................................................11
Legal Status ........................................................................................................................... 11
Juristic Personality ................................................................................................................. 11
Principles of Agency ............................................................................................................... 11
Fiduciary Law ......................................................................................................................... 11
Juristic Persons ...............................................................................................................12
Development and History....................................................................................................... 12
Juristic Person.................................................................................................................12
Enabling Legislation ............................................................................................................... 12
Common Law Juristic Persons ................................................................................................. 12
Company as a Juristic Person .................................................................................................. 13
Features of a Separate Juristic Personality .............................................................................. 13
Principles of Agency ........................................................................................................14
Nature of Commercial Agency .........................................................................................15
Implied Terms of the Contract of Agency .........................................................................15
Duties of the Agent ................................................................................................................ 15
Duties of the Principal ............................................................................................................ 15
The Agency Relationship .................................................................................................16
Commercial Agency ........................................................................................................16
Commercial Advantages of Empowered Agents ...................................................................... 16
Authority ........................................................................................................................16
How does an Agent Acquire Authority? .................................................................................. 17
....................................................................................................18
.............................................................................................. 18
Fiduciary Law .................................................................................................................20
What is a Fiduciary? ............................................................................................................... 20
..................................................................................... 20
Establishing a Fiduciary Relationship ...................................................................................... 21
Examples of Fiduciary Duties .................................................................................................. 21
2
, Examples of Fiduciaries .......................................................................................................... 22
Principles of Delict ..........................................................................................................22
.......................................................................................................... 22
...................................................................................................... 22
Part 2: Unincorporated Firms ..........................................................................................25
The Sole Proprietor .........................................................................................................25
The Partnership ..............................................................................................................25
Nature of a Partnership .......................................................................................................... 25
Requirements for a Valid Partnership Agreement ................................................................... 25
Definition of a Partnership: Elements ..................................................................................... 26
Legal Nature of a Partnership ................................................................................................. 27
The Partnership Fund ......................................................................................................27
Rights and Duties of Partners ..........................................................................................28
Rights of the Partners............................................................................................................. 28
Duties of the Partners ............................................................................................................ 28
Rights and Duties of Partners ................................................................................................. 29
Extraordinary Partnerships .............................................................................................30
Incorporated Partnerships ..............................................................................................30
Liability to Third Parties ..................................................................................................31
Incidence ............................................................................................................................... 31
Limitations............................................................................................................................. 31
Liability to Third Parties: Authority..................................................................................31
Implied Authority................................................................................................................... 32
Liability to Third Parties: Variations ................................................................................32
Criminal Liability .................................................................................................................... 32
Civil Proceedings .................................................................................................................... 33
Dissolution of the Partnership .........................................................................................33
Causes of Dissolution ............................................................................................................. 33
Consequences of Dissolution .................................................................................................. 34
Class Exercise: Partnerships ............................................................................................35
Spot Test 1 Answers ........................................................................................................38
Business Trusts ...............................................................................................................38
Legal Nature of a Trust ........................................................................................................... 38
Parties to a Trust.................................................................................................................... 39
Types of Trusts....................................................................................................................... 39
3
, Creation of a Trust ................................................................................................................. 39
Duties of the Trustee.............................................................................................................. 40
Legal Position of the Beneficiary, Generally ............................................................................ 40
The Business Trust ..........................................................................................................40
Part 3: Pre-Incorporation Matters ...................................................................................42
The Promoter ........................................................................................................................ 42
Pre-Incorporation Contracts ............................................................................................42
Pre-Incorporation Contracts: Options ..................................................................................... 43
Section 21: Requirements................................................................................................43
Liability of Promoter Under Section 21 ................................................................................... 44
Entitlements of Promoter Under Section 21 ............................................................................ 44
Class Exercise 2 ...............................................................................................................44
Part 4: Regulatory framework.........................................................................................45
Overview ............................................................................................................................... 45
Defining Corporate Governance ......................................................................................46
Defining Corporate Governance ............................................................................................. 46
Good Corporate Governance is Not an End in Itself ................................................................. 47
................................................................................................47
Pluralist Approach.................................................................................................................. 47
Enlightened Shareholder Value Approach ............................................................................... 47
Relevant Sources of Law .................................................................................................48
The Companies Act 2008: Underlying Principles ...............................................................48
The Companies Act 2008: Structure .................................................................................49
The King Codes: Introduction ..........................................................................................49
Best Principles (and Practices) ................................................................................................ 49
............................................................................................. 50
King IV............................................................................................................................50
The Financial Markets Act ...............................................................................................51
Objects of Act ........................................................................................................................ 51
Offences Under Market Abuse (Chapter X) [penalties: s 109]................................................... 51
1. Insider Trading ........................................................................................................51
What is insider trading? ......................................................................................................... 51
......................................................................52
..........................................................................................52
Liability for Insider Trading ..................................................................................................... 53
4
