QUESTION 1
1.1 Discuss the meaning of the term “ubuntu”.
Ubuntu is an African indigenous philosophy that is the measure of human
behaviour. It is the ideal to live life selflessly and to make sacrifices for others who,
in turn, will live selflessly. It places the well-being of the individual in all
transactions. It is similar to the audi alteram partem rule, which means that both
sides of the story must be heard. Ubuntu is attributed to communal living, a
shared sense of belonging, group solidarity, reciprocity and collective ownership of
assets.
With regards to business, ubuntu embodies the following elements:
the ability to show compassion,
social justice and fairness,
harmony and humanity,
recognising the interconnectedness of people and the accompanying
responsibilities,
integrity and ethical behaviour ,
open channels of communication and transparency, and
due process and sensitivity in dealings with one another.
Constitutionally, the philosophy of ubuntu harmonises the indigenous value system
with the common law. It was given explicit application by the court in S v
Makwanyane 1995 (6) BCLR 665 (CC) when it advocated social justice and
fairness.
1.2 Discuss the common-law Turquand rule and the formulation of this rule
under the Companies Act 71 of 2008.
The Turquand rule is derived from Royal British Bank v Turquand (1856) and was
formulated to provide and outsider with a duty to inquire into the affairs of the
company within reasonable grounds. It provides that an outsider contracting with
the company in good faith is entitled to assume that all internal procedures and
requirements have been complied with.
The company will be bound even where internal requirements and procedures
have not been complied with, except in circumstances where the outsider was
aware of the non-compliance of the internal requirements and procedures, or
where the contract being concluded was suspicious.
In Wolpert v Uitzigt Properties (Pty) Ltd 1961 (2) SA 257 (W), the court stated that
an outsider may not assume that the director with whom he or she is contracting
with is the particular director who has been given such authority. The Turquand
rule only operates under the requirement of internal formalities.
The decision in Tuckers Land Development Corporation (Pty) Ltd v Perpellief 1978
(2) SA 11 (T) found that outsiders may not automatically assume that the individual
, who purported to act on behalf of the company had the necessary authority to do
so, and the company may be able to escape liability on the grounds that the
person acting on its behalf had no authority.
The Turquand rule has been codified in section 20(7) and section 20(8) of the
Companies Act 71 of 2008. Section 20(7) and Section 20(8) of the Act read as
follows:
20(7) A person dealing with a company in good faith, other than a director,
prescribed officer or shareholder of the company, is entitled to presume that the
company, in making any decision in the exercise of its powers, has complied with
all of the formal and procedural requirements in terms of this Act, its Memorandum
of Incorporation (MOI) and any rules of the company unless, in the circumstances,
the person knew or reasonably ought to have known of any failure by the company
to comply with any such requirement.
20(8) Subsection (7) must be construed concurrently with, and not in substitution
for, any relevant common law principle relating to the presumed validity of the
actions of a company in the exercise of its powers.
Section 20(7) of the Act contains provisions that resemble the Turquand rule.
Section 20(7) does not replace the Turquand rule as provided by section 20(8)
which provides that subsection 7 must be interpreted concurrently with, and not in
substitution for any relevant common-law principle that relates to the validity of the
actions of a company.
The decision in One Stop Financial Services (Pty) Ltd v Neffensaan Ontwikkelings
(Pty Ltd and Another (20028/14) [2015] ZAWHC 89 clarified the application of
sections 20(7) and 20(8) of the Act, in light of the abolishment of the Doctrine of
Constructive Notice which provided that third parties dealing with the company are
deemed to be fully aware and familiar with the contents of the public documents of
the company. This had detrimental consequences for third parties faced with the
company that had acted ultra vires. This doctrine was abolished by section 19(4)
of the Act.
As such, third parties contracting with the company will no longer be deemed to
have had the knowledge of the company’s public documents. However, section
19(5) provides two exceptions:
A person is deemed to have knowledge of any provision of the company’s
MOI if the name of the company includes the ending “RF” and the
company’s Notice of Incorporation contains a prominent statement drawing
attention to such provision as required by section 13(3), and
An exception applies to a personal liability company - Directors and past
directors of a personal liability company are jointly and severally liable
together with the company for any debts and liabilities of the company
contracted during their respective periods of office.
1
1.1 Discuss the meaning of the term “ubuntu”.
Ubuntu is an African indigenous philosophy that is the measure of human
behaviour. It is the ideal to live life selflessly and to make sacrifices for others who,
in turn, will live selflessly. It places the well-being of the individual in all
transactions. It is similar to the audi alteram partem rule, which means that both
sides of the story must be heard. Ubuntu is attributed to communal living, a
shared sense of belonging, group solidarity, reciprocity and collective ownership of
assets.
With regards to business, ubuntu embodies the following elements:
the ability to show compassion,
social justice and fairness,
harmony and humanity,
recognising the interconnectedness of people and the accompanying
responsibilities,
integrity and ethical behaviour ,
open channels of communication and transparency, and
due process and sensitivity in dealings with one another.
Constitutionally, the philosophy of ubuntu harmonises the indigenous value system
with the common law. It was given explicit application by the court in S v
Makwanyane 1995 (6) BCLR 665 (CC) when it advocated social justice and
fairness.
1.2 Discuss the common-law Turquand rule and the formulation of this rule
under the Companies Act 71 of 2008.
The Turquand rule is derived from Royal British Bank v Turquand (1856) and was
formulated to provide and outsider with a duty to inquire into the affairs of the
company within reasonable grounds. It provides that an outsider contracting with
the company in good faith is entitled to assume that all internal procedures and
requirements have been complied with.
The company will be bound even where internal requirements and procedures
have not been complied with, except in circumstances where the outsider was
aware of the non-compliance of the internal requirements and procedures, or
where the contract being concluded was suspicious.
In Wolpert v Uitzigt Properties (Pty) Ltd 1961 (2) SA 257 (W), the court stated that
an outsider may not assume that the director with whom he or she is contracting
with is the particular director who has been given such authority. The Turquand
rule only operates under the requirement of internal formalities.
The decision in Tuckers Land Development Corporation (Pty) Ltd v Perpellief 1978
(2) SA 11 (T) found that outsiders may not automatically assume that the individual
, who purported to act on behalf of the company had the necessary authority to do
so, and the company may be able to escape liability on the grounds that the
person acting on its behalf had no authority.
The Turquand rule has been codified in section 20(7) and section 20(8) of the
Companies Act 71 of 2008. Section 20(7) and Section 20(8) of the Act read as
follows:
20(7) A person dealing with a company in good faith, other than a director,
prescribed officer or shareholder of the company, is entitled to presume that the
company, in making any decision in the exercise of its powers, has complied with
all of the formal and procedural requirements in terms of this Act, its Memorandum
of Incorporation (MOI) and any rules of the company unless, in the circumstances,
the person knew or reasonably ought to have known of any failure by the company
to comply with any such requirement.
20(8) Subsection (7) must be construed concurrently with, and not in substitution
for, any relevant common law principle relating to the presumed validity of the
actions of a company in the exercise of its powers.
Section 20(7) of the Act contains provisions that resemble the Turquand rule.
Section 20(7) does not replace the Turquand rule as provided by section 20(8)
which provides that subsection 7 must be interpreted concurrently with, and not in
substitution for any relevant common-law principle that relates to the validity of the
actions of a company.
The decision in One Stop Financial Services (Pty) Ltd v Neffensaan Ontwikkelings
(Pty Ltd and Another (20028/14) [2015] ZAWHC 89 clarified the application of
sections 20(7) and 20(8) of the Act, in light of the abolishment of the Doctrine of
Constructive Notice which provided that third parties dealing with the company are
deemed to be fully aware and familiar with the contents of the public documents of
the company. This had detrimental consequences for third parties faced with the
company that had acted ultra vires. This doctrine was abolished by section 19(4)
of the Act.
As such, third parties contracting with the company will no longer be deemed to
have had the knowledge of the company’s public documents. However, section
19(5) provides two exceptions:
A person is deemed to have knowledge of any provision of the company’s
MOI if the name of the company includes the ending “RF” and the
company’s Notice of Incorporation contains a prominent statement drawing
attention to such provision as required by section 13(3), and
An exception applies to a personal liability company - Directors and past
directors of a personal liability company are jointly and severally liable
together with the company for any debts and liabilities of the company
contracted during their respective periods of office.
1
