1
EXAMINATION PACK
MRL2601
Entrepreneurial law
QUESTION PAPERS AND ANSWERS
1
, 2
TABLE OF CONTENTS
MEMOS FROM
OCT/NOV 2020
MAY / JUNE 2020
OCTOBER / NOVEMBER 2019.
MAY/JUNE 2019.
OCTOBER / NOVEMBER 2018.
MAY/JUNE 2018.
OCTOBER / NOVEMBER 2017.
MAY/JUNE 2017.
OCTOBER / NOVEMBER 2016.
MAY/JUNE 2016.
2
, 3
MRL2601 MAY JUNE 2020 EXAMINATION
Question 1
An ultra vires transaction is concluded is beyond the company’s legal capacity or its
outside the scope of the company’s business. An example would be if a company’s
principal business is, carpentry, it would be outside the company’s capacity to buy an
expensive sports car on behalf of the company. This doctrine presupposes that a
company exists in law only for the purpose for which it was incorporated.
An ultra vires transaction was not binding. With the advent of section 19(1)(a) of the
Companies Act, a company attains its separate juristic personality upon incorporation.
When incorporated a company enjoys perpetual existence. The business of the
company is not affected by a change in the shareholders or members of the company.
A company may be terminated by deregistration and dissolution. Section 19(1)(b) of the
Companies Act goes on to provide that as a result of this juristic personality a company
has all the legal capacity and the powers of a natural person, except to the extent it
incapable of exercising any such power, or the company’s MOI provides otherwise. The
company is no longer limited to its scope or objectives of the business, and they do not
even have to be stated in the MOI. The company may put restrictions in its MOI so as
to narrow the scope of the companies activities, any such restrictions would not render
any contract invalid that conflicts with these restrictions (section 20(1)(a)). The contract
will still be valid and binding on the company and the other party to the contract even if it
is an ultra vires transaction.
In the facts of the scenario, Gangnam’s Tile (Pty) Ltd will not be able to deny liability,
thus the company will be bound to the contract even if it is an Ultra vires transaction.
Question 2
3
, 4
There are two different ways in which Gangnum’s Tiles Ltd can pass a resolution
without holding a meeting that is in terms of common law rule of unanimous assent and
in terms of section 60 of the Companies Act.
Under common law the rule provides that some resolutions can be made and will be
valid without holding a formal meeting, provided that:
(i) all the members are fully aware of the facts and
(ii) all of them must assented to the unanimous assent
(iii) it does not need to be in writing.
In Gohlke case, it was held that a director could be validly appointed to a board without
any formal meeting being held, because of unanimous consent. In another case (In re
Duomatic Ltd) the court held that the unanimous approval of directors’ remuneration by
the two directors holding all the voting shares in a company could be seen as a
resolution of a general meeting approving payment.
The statutory unanimous assent is in terms of section 60 of the Companies Act, which
states that a determination may be submitted to shareholders:
(i) It must be in writing and
(ii) must have been passed by the required majority.
That determination will have the same effect as if it had been adopted at a meeting
without there being an actual general meeting being held by the shareholders. Section
60 does not require the approval of every shareholder but of the required majority. Thus,
if the required majority, agree in writing, a resolution may be validly passed without
having a shareholders’ meeting.
Question 3
1. O
2. H
4
EXAMINATION PACK
MRL2601
Entrepreneurial law
QUESTION PAPERS AND ANSWERS
1
, 2
TABLE OF CONTENTS
MEMOS FROM
OCT/NOV 2020
MAY / JUNE 2020
OCTOBER / NOVEMBER 2019.
MAY/JUNE 2019.
OCTOBER / NOVEMBER 2018.
MAY/JUNE 2018.
OCTOBER / NOVEMBER 2017.
MAY/JUNE 2017.
OCTOBER / NOVEMBER 2016.
MAY/JUNE 2016.
2
, 3
MRL2601 MAY JUNE 2020 EXAMINATION
Question 1
An ultra vires transaction is concluded is beyond the company’s legal capacity or its
outside the scope of the company’s business. An example would be if a company’s
principal business is, carpentry, it would be outside the company’s capacity to buy an
expensive sports car on behalf of the company. This doctrine presupposes that a
company exists in law only for the purpose for which it was incorporated.
An ultra vires transaction was not binding. With the advent of section 19(1)(a) of the
Companies Act, a company attains its separate juristic personality upon incorporation.
When incorporated a company enjoys perpetual existence. The business of the
company is not affected by a change in the shareholders or members of the company.
A company may be terminated by deregistration and dissolution. Section 19(1)(b) of the
Companies Act goes on to provide that as a result of this juristic personality a company
has all the legal capacity and the powers of a natural person, except to the extent it
incapable of exercising any such power, or the company’s MOI provides otherwise. The
company is no longer limited to its scope or objectives of the business, and they do not
even have to be stated in the MOI. The company may put restrictions in its MOI so as
to narrow the scope of the companies activities, any such restrictions would not render
any contract invalid that conflicts with these restrictions (section 20(1)(a)). The contract
will still be valid and binding on the company and the other party to the contract even if it
is an ultra vires transaction.
In the facts of the scenario, Gangnam’s Tile (Pty) Ltd will not be able to deny liability,
thus the company will be bound to the contract even if it is an Ultra vires transaction.
Question 2
3
, 4
There are two different ways in which Gangnum’s Tiles Ltd can pass a resolution
without holding a meeting that is in terms of common law rule of unanimous assent and
in terms of section 60 of the Companies Act.
Under common law the rule provides that some resolutions can be made and will be
valid without holding a formal meeting, provided that:
(i) all the members are fully aware of the facts and
(ii) all of them must assented to the unanimous assent
(iii) it does not need to be in writing.
In Gohlke case, it was held that a director could be validly appointed to a board without
any formal meeting being held, because of unanimous consent. In another case (In re
Duomatic Ltd) the court held that the unanimous approval of directors’ remuneration by
the two directors holding all the voting shares in a company could be seen as a
resolution of a general meeting approving payment.
The statutory unanimous assent is in terms of section 60 of the Companies Act, which
states that a determination may be submitted to shareholders:
(i) It must be in writing and
(ii) must have been passed by the required majority.
That determination will have the same effect as if it had been adopted at a meeting
without there being an actual general meeting being held by the shareholders. Section
60 does not require the approval of every shareholder but of the required majority. Thus,
if the required majority, agree in writing, a resolution may be validly passed without
having a shareholders’ meeting.
Question 3
1. O
2. H
4
