What does section 19(1) of the CA stay?
Section 19(1) of the CA holds that a company becomes a legal or artificial person with its own rights and obligations at incorporation and registration. Once incorporated, it becomes a natural person.
What are the effect of legal personality?
Effect of legal personality :
* The company is a separate legal subject
* It is liable for its own debts (see s 19(2))
* It owns its own property
* Any profits belong to the company
* The company must sue and be sued in its own name
* The company enjoys perpetual succession.
What are the distinct features of a company?
A company has distinct features
* separate legal personality
* Limited liability - only liable to what has been contributed
* separation of equity investment and managerial responsibility.
What is a juristic person?
A juristic person is an entity that is endowed by law with the capacity to acquire rights and obligations independent of its members
What does Salomon hold?
- Salomon v A Salomon & Co holds that a contract between a company and a main shareholder, even one who controls all of the shares in the company, is a valid bilateral contract unless the company is a sham or mere simulacrum.
- Salomon held that the company is at law a different person altogether from the subscribers to the memorandum; and, though it may be that after incorporation the business they act as members, they cannot be sued for the debt as the company is a separate legal entity.
What was held in Dadoo?
Dadoo Ltd v Krugersdorp Municipal Councils case held that racial segregation laws do not apply to companys who own the company, as a company does not have a race
What was held in Lee v Lee?
Lee v Lee Air Farming Co, held that a contract between a shareholder as an employee in the company is a valid contract as the company is a separate legal entity, although the shareholder represents both parties.
What was held in Macaura v Northen Assurance?
It was held in Macaura v Northern Assurance Co Ltd’s that shareholders do not have a proprietary or equitable claim against the company’s assets.
What was held in Re Polly Peck?
Re Polly Peck held that a parent company can never lose more than its investment in the event its subsidiary goes insolvent
When can the Corporate Veil be pierced in certain instances?
The Corporate Veil can be pierced in certain instances:
* Where Faud, dishonesty or other improper conduct is being perpetrated and in circumstances where policy considerations in favour of disregarding the separate legal personality of the company outweigh the considerations opposed thereto (Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd)
* Where, in the public interest, it was decided that the company had assumed enemy characteristics during war. (Daimler Co Ltd v Continental Tyre and Rubber Co)
* Where the company was a facade, which is being used in order to evade an existing legal obligation or to practise some other deception (Reasey v Breachwood Motors Ltd)
* Where there was fraudulent use of legal personality for purposes of improper conduct or to avoid a legal obligation (R v Gillette)
* Where a company is incorporated from a partnership for the benefit of a partnership, the court may hold it a quasi-partnership company (Ebrabimi v Westbourne Galleries Ltd and Others)
What is held in Hulse-Reuter?
Hülse-Reuter and Others v Gödde, where the court emphasised that the misuse or abuse of the distinction between the corporate entity and those who control it should result in some unfair advantage to them. To determine if a veil should bepericed it will depend on a close analysis of the facts of each case, considerations of policy and judicial judgment.
What was held in Section 20(9) of the CA?
Section 20(9) of the CA, holds that the legal separation veil can be removed whenever a court, on application by an interested person, or in proccedings finds that the incorporation of, that company constitutes an unconscionable abuse of the juristic personality of the company as a separate entity
What may the court hold in terms of section 20(9)?
the court may:
* declare that the company is to be deemed not to be a juristic person in respect of such rights, obligations or liabilities of the company
* The court may give such further order or orders as it may deem fit in order to give effect to a declaration of piercing the veil
What are limited companies
Limited companies are companies that can’t transfer or advertise shares with the general public, this is in the Memorandum of Incorporation (MOI), where it states the limitations to share transfers and the constitution of the company
Who is a company incorporator?
A company incorporator is anyone who takes it upon themselves to form a company and brings it into existence. Companies that wish to be registered with a stock exchange are required to comply with a host of further regulations imposed by the relevant listing authority.
When can a company commence its operations?
- A company can only commence its business operations once the registration of its Notice and MOI and company rules have been completed and the Commission has issued a certificate that the company is duly incorporated.
- This certificate of incorporation constitutes conclusive proof of the company’s incorporation in the absence of proof of fraud. A company is incorporated in accordance with the Companies and Intellectual Property Commission (CIPC) and regulated by the CIPC
What was held in section 15(3) of the CA?
Section 15(3) of the CA holds that the board of the company may make, amend or repeal any necessary or incidental rules relating to the governance of the company in relation to the Memorandum of Incorporation.
What was held in section 15(6) of the CA?
Section 15(6) of the CA holds that certain documents are binding on shareholders of the company, and between the company, such as:
* Each director or prescribed officer of the company
* any person serving the company as a member of a committee or of the board.
What can be included in an MOI?
The MOI of a company may, according to section 15(2) of the CA:
* include any provision dealing with matters that the Act does not address;
* include any provision altering the effect of any alterable provision of the Act;
* include any provision imposing on the company a higher standard, greater restriction, longer period of time or any similarly more onerous requirement, than would otherwise apply to the company in terms of an unalterable provision of this Act;
* include any restrictive conditions applicable to the company, and any requirement for the amendment of any such condition in addition to the requirements set out for the amendment of the Memorandum of Incorporation in terms of section 16
* prohibit the amendment of any particular provision of the MOI;
* not include any provision that negates, restricts, limits, qualifies, extends or otherwise alters the substance or effect of an unalterable provision of the Act, except to the extent of imposing a higher standard, greater restriction, longer period of time or any similarly more onerous requirement.
*
How is the MOI completed?
In terms of section 13(1)(a), the memorandum must be completed in the prescribed manner or in a form unique to the company and signed by every shareholder or member of the company, in person or by proxy.
How does a company get its name?
- Companies are mandated under section 12 of the CA to name the company and reserve the name by filling out the applicable name registration information.
- A Company in section 12(9) can register a name as a name as a defensive name by applying to the Commission to register any name as a defensive name for a period of two years, on application on the prescribed form and on payment of the prescribed fee., where it is proven there is a direct and substantial interest in the name the Commsion can renew the name for a period of two years.
When can the CIPC refuse to reserve a companies name?
The only instances in which the CIPC is allowed to refuse to reserve the name
applied for are:
* where the applicant is prohibited, in terms of section 11(2)(a), from using the name as applied for
* Where the name as applied for is already reserved (a name can only be reserved for six months from the date of the application)
What are the two types of companies?
Section 8 CA holds that there are two types of companies:
* Profit companies - Private company, state owned company,
* Non-profit companies (NPC) - investors dont make a profit, although the companies make a profit
What are the factors of an non-profit?
Non-profit companies (NPC) factors:
* Must have at least one public benefit or social/cultural object.
* Must apply all assets to its stated objects
* Residual value must be distributed to like organisations
* May not merge with, or convert to a profit company
