1
ENTREPRENEURIAL LAW
MRL2601
NAME(S) & SURNAME
STUDENT NUMBER
EXAMINATION
OCT/NOV 2021
, 2
QUESTION 1
Section 22(1) of the Companies Act 71 of 2008 regulates reckless and
fraudulent trading. If directors continued running business knowing that
company is insolvent with the intention to defraud creditor they can incur
personal liability in terms of section 77 of the Companies Act 71 of 2008.
Section 64 provides that if it appears that any business of a CC was carried on
recklessly, with gross negligence or fraudulently, the court may declare that
any person who was knowingly a party to the carrying on of the business in
such a manner will be personally liable for such debts or other liabilities of the
CC as the court may direct.The section also provides that the court may give
such further orders as it considers proper for giving effect to and enforcing
such liability. The application may be brought by the Master, any creditor,
member or the liquidator of the CC. The carrying on of business in such a
manner is also a criminal offence, apart from any other criminal liability
resulting from such conduct.
Section 77 provides that A director of a company may be held liable—
(a) in accordance with the principles of the common law relating to breach of a
fiduciary duty, for any loss, damages or costs sustained by the company as a
consequence of any breach by the director of a duty contemplated in section
in accordance with the principles of the common law relating to delict for any
loss, damages or costs sustained by the company as a consequence of any
breach by the director of:
(i) a duty contemplated in section 76(3)(c);
(ii) any provision of this Act not otherwise mentioned in this section; or
(iii) any provision of the company’s Memorandum of Incorporation.
the director is or may be liable, but has acted honestly and reasonably; or
(b) having regard to all the circumstances of the case, including those
connected with the appointment of the director, it would be fair to excuse the
director.
A director who has reason to apprehend that a claim may be made alleging
that the director is liable, other than for wilful misconduct or wilful breach of
trust, may apply to a court for relief, and the court may grant relief to the
director on the same.
In Gatenby v Gaten by the ambit of section 49 was defined as follows:
‘The object of section 49 is to come to the relief of the victim of oppressive
conduct. The section gives the Court the power to make orders “with a view to
settling the dispute” between the members of a close corporation if it is just
and equitable to do so. To this end the Court is given a wide discretion. It may
“make such order as it thinks fit”, within the framework of either “regulating the
future conduct of the affairs of the corporation” or “the purchase of the interest
of any member of the corporation by other members thereof or by the
ENTREPRENEURIAL LAW
MRL2601
NAME(S) & SURNAME
STUDENT NUMBER
EXAMINATION
OCT/NOV 2021
, 2
QUESTION 1
Section 22(1) of the Companies Act 71 of 2008 regulates reckless and
fraudulent trading. If directors continued running business knowing that
company is insolvent with the intention to defraud creditor they can incur
personal liability in terms of section 77 of the Companies Act 71 of 2008.
Section 64 provides that if it appears that any business of a CC was carried on
recklessly, with gross negligence or fraudulently, the court may declare that
any person who was knowingly a party to the carrying on of the business in
such a manner will be personally liable for such debts or other liabilities of the
CC as the court may direct.The section also provides that the court may give
such further orders as it considers proper for giving effect to and enforcing
such liability. The application may be brought by the Master, any creditor,
member or the liquidator of the CC. The carrying on of business in such a
manner is also a criminal offence, apart from any other criminal liability
resulting from such conduct.
Section 77 provides that A director of a company may be held liable—
(a) in accordance with the principles of the common law relating to breach of a
fiduciary duty, for any loss, damages or costs sustained by the company as a
consequence of any breach by the director of a duty contemplated in section
in accordance with the principles of the common law relating to delict for any
loss, damages or costs sustained by the company as a consequence of any
breach by the director of:
(i) a duty contemplated in section 76(3)(c);
(ii) any provision of this Act not otherwise mentioned in this section; or
(iii) any provision of the company’s Memorandum of Incorporation.
the director is or may be liable, but has acted honestly and reasonably; or
(b) having regard to all the circumstances of the case, including those
connected with the appointment of the director, it would be fair to excuse the
director.
A director who has reason to apprehend that a claim may be made alleging
that the director is liable, other than for wilful misconduct or wilful breach of
trust, may apply to a court for relief, and the court may grant relief to the
director on the same.
In Gatenby v Gaten by the ambit of section 49 was defined as follows:
‘The object of section 49 is to come to the relief of the victim of oppressive
conduct. The section gives the Court the power to make orders “with a view to
settling the dispute” between the members of a close corporation if it is just
and equitable to do so. To this end the Court is given a wide discretion. It may
“make such order as it thinks fit”, within the framework of either “regulating the
future conduct of the affairs of the corporation” or “the purchase of the interest
of any member of the corporation by other members thereof or by the
