MRL 2601 EXAMINATION PREPARATION Q AND A

MRL 2601 EXAMINATION PREPARATION MAY JUNE 2018 11 MAY 2018. Section A Question 1. 1. What documents must be filed with the Companies and Intellectual Property Commission to register a company?  The Notice of Incorporation and the Memorandum of Incorporation 2. How flexible is the Memorandum of Incorporation?  One may include any provision or change any provision in a Memorandum of Incorporation as long as it is consistent with the Companies Act 71 of 2008. 3. What is the legal status of the Memorandum of Incorporation and the rules developed by the board of directors?  They are binding on several persons in terms of section 15 of the Companies Act. The relationship created is contractual in nature. 4. List five matters that must be contained in a company’s Memorandum of Incorporation. The Memorandum of Incorporation contains the following information:  details of the incorporators  the number of directors and alternate directors  the share capital (maximum issued)  the content of the Memorandum of Incorporation  Unalterable provisions 5. List three main differences between profit companies and non-profit companies  A profit company aims to make a profit which is to be divided between its shareholders.  The purpose for incorporation of a non-profit company is much different. It must be for a cultural, social or public benefit or other object than financial gain for its shareholders. 1 6. What factors would the court consider to ascertain whether or not a proposed name is undesirable? Refer to relevant case law in your answer.  The activities that the companies engaged in;  The similarity in the names and whether it would cause confusion;  The client bases of the respective companies;  whether the name is undesirable and calculated to cause harm to the other company;  The likelihood that members of the public would be confused in their dealings with the competing companies;  The date of registration of the companies would also play a role.  Peregrine Group (Pty) Ltd & others v Peregrine Holdings Ltd & others 7. Who can order a name change where a name to be registered is similar to an existent company’s name?  The High Court can make an order to change a name if the matter is referred to it and passing-off is successfully proven. Disputes regarding names may also be referred to the Companies Tribunal or the Human Rights Commission in terms of section 160 of the Companies Act. 8. The power given to a court to declare a director delinquent or place a director under probation has been introduced into South African corporate law for the first time by the Companies Act 71 of 2008. Answer the following questions regarding this remedy: 1. Under what section of the Companies Act 71 of 2008 is this action instituted?  In terms of section 162 of the Companies Act 71 of 2008. 2. Name three persons who may bring the application Any one of the following may apply for a delinquency order:  a company 2  a shareholder  a director  a company secretary or prescribed officer  a registered trade union/other employee representative  The Commission or Takeover Regulation Panel or a state organ may also in certain circumstances apply to declare a director delinquent. 3. List three grounds on which an application for a delinquency order may be brought Grounds for the order: The person  served as a director while disqualified, or  acted as a director while under probation in a manner that contravened the order of probation  grossly abused the position of director  took personal advantage of information/an opportunity  intentionally/ as a result of gross negligence inflicted harm on the company/subsidiary  acted in a manner that amounts to gross negligence, wilful misconduct or breach of trust 4. What three additional conditions can the court attach to a declaration of delinquency) The court may, in a declaration of delinquency, order that the person  undergo remedial education  carry out a designated programme of community service  pay compensation 5. The consequences of such an order.  The person will not be allowed to serve as a director for a specific period of time.  Note that this application may be made only in those cases where the declaration was not made unconditional and for the lifetime of the person declared delinquent.  Also note that the applicant first has to apply for a suspension of the order and then, after a further two years, may apply for it to be set aside.