MRL2601 LATEST EXAM PACK 2027 – Entrepreneurial Law
200 Detailed Practice Questions with Answers and
Explanations
SECTION A: GENERAL PRINCIPLES AND SOURCES OF ENTREPRENEURIAL LAW (Questions 1–15)
Question 1
Which of the following is NOT a primary source of South African entrepreneurial law?
A) The Companies Act 71 of 2008
B) The Close Corporations Act 69 of 1984
C) The Constitution of the Republic of South Africa, 1996
D) The National Credit Act 34 of 2005
Correct Answer: D (The National Credit Act 34 of 2005)
Explanation: The primary sources of entrepreneurial law include the Companies Act 71 of 2008, the
Close Corporations Act 69 of 1984, the Constitution, common law, case law, and customary law. The
National Credit Act regulates consumer credit but is not a primary source of entrepreneurial law.
Question 2
The concept of "separate legal personality" means that a company:
A) Is the same as its shareholders
B) Is a distinct legal entity from its shareholders and directors
C) Has no rights or duties
D) Cannot be sued
,Correct Answer: B (Is a distinct legal entity from its shareholders and directors)
Explanation: Section 19(1)(b) of the Companies Act 71 of 2008 recognizes a company as a separate legal
person, meaning it has its own legal identity, distinct from its directors and shareholders, can own
property in its own name, and can sue or be sued in its own name.
Question 3
In which landmark English case was the principle of separate legal personality firmly established?
A) Botha v Van Niekerk
B) Salomon v Salomon & Co Ltd
C) Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd
D) Ex Parte Gore and others NNO
Correct Answer: B (Salomon v Salomon & Co Ltd)
Explanation: Salomon v Salomon & Co Ltd established the principle that a company is a separate legal
entity distinct from its shareholders, even if one person controls the company. This principle is followed
in South African law and is recognized in section 19(1)(b) of the Companies Act.
Question 4
What does "piercing the corporate veil" entail?
A) Ignoring the company's separate legal identity and holding shareholders/directors personally liable
B) Publicly listing the company on the stock exchange
C) Amending the company's Memorandum of Incorporation
D) Appointing an auditor to examine company records
,Correct Answer: A (Ignoring the company's separate legal identity and holding shareholders/directors
personally liable)
Explanation: Piercing the corporate veil occurs when a court disregards the company's separate legal
personality and holds shareholders or directors personally liable for the company's debts or actions. This
typically happens where fraud, dishonesty, or improper conduct is involved.
Question 5
According to South African case law, which of the following is a ground for piercing the corporate veil?
A) The company generates high profits
B) The company is used for fraudulent or dishonest purposes
C) The company has more than one director
D) The company pays dividends
Correct Answer: B (The company is used for fraudulent or dishonest purposes)
Explanation: Courts will pierce the corporate veil where the company is used for fraud or dishonest
purposes, as a puppet or tool of another person, to evade a legal duty or obligation, or to commit an
unconscionable injustice. This was illustrated in cases such as Lategan v Boyes and Botha v Van Niekerk.
Question 6
Which section of the Companies Act 71 of 2008 provides courts with authority to pierce/ disregard the
corporate veil?
A) Section 20(9)
B) Section 19(1)(b)
C) Section 46
D) Section 60
, Correct Answer: A (Section 20(9))
Explanation: Section 20(9) of the Companies Act 71 of 2008 authorizes courts to disregard a company's
separate legal personality in certain circumstances (though the common law grounds remain relevant)
Question 7
A juristic person is a(n):
A) Natural person who runs a business
B) Entity with legal rights and duties separate from its members
C) Person who has been convicted of a crime
D) Individual who is a beneficiary of a trust
Correct Answer: B (Entity with legal rights and duties separate from its members)
Explanation: A juristic person is an entity recognized by law as having its own legal personality, separate
from its members or owners, enabling it to have rights and duties, own property, and enter into
contracts in its own name.
Question 8
Which business form is NOT recognized as having separate legal personality under South African law?
A) A private company ((Pty) Ltd)
B) A close corporation (CC)
C) An ordinary partnership
D) A non-profit company (NPC)
Correct Answer: C (An ordinary partnership)
Explanation: Ordinary partnerships do not have separate legal personality — partners are jointly and
severally liable for partnership debts. In contrast, companies and close corporations are juristic persons
distinct from their members.
200 Detailed Practice Questions with Answers and
Explanations
SECTION A: GENERAL PRINCIPLES AND SOURCES OF ENTREPRENEURIAL LAW (Questions 1–15)
Question 1
Which of the following is NOT a primary source of South African entrepreneurial law?
A) The Companies Act 71 of 2008
B) The Close Corporations Act 69 of 1984
C) The Constitution of the Republic of South Africa, 1996
D) The National Credit Act 34 of 2005
Correct Answer: D (The National Credit Act 34 of 2005)
Explanation: The primary sources of entrepreneurial law include the Companies Act 71 of 2008, the
Close Corporations Act 69 of 1984, the Constitution, common law, case law, and customary law. The
National Credit Act regulates consumer credit but is not a primary source of entrepreneurial law.
Question 2
The concept of "separate legal personality" means that a company:
A) Is the same as its shareholders
B) Is a distinct legal entity from its shareholders and directors
C) Has no rights or duties
D) Cannot be sued
,Correct Answer: B (Is a distinct legal entity from its shareholders and directors)
Explanation: Section 19(1)(b) of the Companies Act 71 of 2008 recognizes a company as a separate legal
person, meaning it has its own legal identity, distinct from its directors and shareholders, can own
property in its own name, and can sue or be sued in its own name.
Question 3
In which landmark English case was the principle of separate legal personality firmly established?
A) Botha v Van Niekerk
B) Salomon v Salomon & Co Ltd
C) Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd
D) Ex Parte Gore and others NNO
Correct Answer: B (Salomon v Salomon & Co Ltd)
Explanation: Salomon v Salomon & Co Ltd established the principle that a company is a separate legal
entity distinct from its shareholders, even if one person controls the company. This principle is followed
in South African law and is recognized in section 19(1)(b) of the Companies Act.
Question 4
What does "piercing the corporate veil" entail?
A) Ignoring the company's separate legal identity and holding shareholders/directors personally liable
B) Publicly listing the company on the stock exchange
C) Amending the company's Memorandum of Incorporation
D) Appointing an auditor to examine company records
,Correct Answer: A (Ignoring the company's separate legal identity and holding shareholders/directors
personally liable)
Explanation: Piercing the corporate veil occurs when a court disregards the company's separate legal
personality and holds shareholders or directors personally liable for the company's debts or actions. This
typically happens where fraud, dishonesty, or improper conduct is involved.
Question 5
According to South African case law, which of the following is a ground for piercing the corporate veil?
A) The company generates high profits
B) The company is used for fraudulent or dishonest purposes
C) The company has more than one director
D) The company pays dividends
Correct Answer: B (The company is used for fraudulent or dishonest purposes)
Explanation: Courts will pierce the corporate veil where the company is used for fraud or dishonest
purposes, as a puppet or tool of another person, to evade a legal duty or obligation, or to commit an
unconscionable injustice. This was illustrated in cases such as Lategan v Boyes and Botha v Van Niekerk.
Question 6
Which section of the Companies Act 71 of 2008 provides courts with authority to pierce/ disregard the
corporate veil?
A) Section 20(9)
B) Section 19(1)(b)
C) Section 46
D) Section 60
, Correct Answer: A (Section 20(9))
Explanation: Section 20(9) of the Companies Act 71 of 2008 authorizes courts to disregard a company's
separate legal personality in certain circumstances (though the common law grounds remain relevant)
Question 7
A juristic person is a(n):
A) Natural person who runs a business
B) Entity with legal rights and duties separate from its members
C) Person who has been convicted of a crime
D) Individual who is a beneficiary of a trust
Correct Answer: B (Entity with legal rights and duties separate from its members)
Explanation: A juristic person is an entity recognized by law as having its own legal personality, separate
from its members or owners, enabling it to have rights and duties, own property, and enter into
contracts in its own name.
Question 8
Which business form is NOT recognized as having separate legal personality under South African law?
A) A private company ((Pty) Ltd)
B) A close corporation (CC)
C) An ordinary partnership
D) A non-profit company (NPC)
Correct Answer: C (An ordinary partnership)
Explanation: Ordinary partnerships do not have separate legal personality — partners are jointly and
severally liable for partnership debts. In contrast, companies and close corporations are juristic persons
distinct from their members.
