Summary MRL2601 - Entrepreneurial Law - Notes.pdf Rate 3 WELL ELABORATED

Principle – Company is a separate legal entity Forms of enterprises – 1. Sole proprietorship – capital on one person invested 2. partnership – 2 or more pool capital and abilities 3. CC – legal personality 4. Company – Legal personality 5. business trust The registration of a company or CC allows the body with separate legal personality with its own rights and liabilities The risk extends only to the loss of amount they contributed as capital CC and company enjoys the benefit of perpetual succession – change in membership does not stop their legal existence) Shareholders of the company do no usually participate directly in management of the enterprise Each member in CC is entitled to participate in the management and no provision is made for a board of directors. Benefit of incorporation – Public Company with Share Capital is the most efficient of mobilizing capital from the investing public. Private companies are aimed at smaller enterprises which do not rely on public funds. The company as a legal person A Company is described as an association of persons with the common objective of acquiring gain. As an association of persons, it exists as a separate entity with a legal personality from registration. Therefore it can acquire rights and duties in its own name assets, employ, sure or be sued. It also acquires rights from the BoR, i.e. nature of company and nature of rights, but the company is not equated to a natural person i.e. right to life. A company is a business entity and can acquire rights and duties and perform acts required for economic activities. It cannot participate in legal transactions itself; it must act through an organ/agent. Acquisition of a legal personality There are 3 ways an associations of persons or organized body can acquire a legal personality. 1. separate act – own separate act of Parliament i.e. legislation relating to Eskom 2. General Enabling Act – the company’s act, CC act. 3. by conduct – by conducting itself as a legal person in compliance with certain requirements e.g. company consists of less than 20 people, acquisition for gain  must pursue the acquisition for gain  Legal personality may appear from the contents of association’s constitution, dealings, nature and activities of association. An association that conducts business without the objective of making a profit may obtain a legal personality by their conduct e.g. charities. Liability of members – they only loose the money they invested. They are not liable for debts of the company. 2 Company as a separate legal entity SALOMON v SALOMON – S (sole Proprietor) then expanded business to include his family (Company). Business went bad and debtors wanted to claim from him personally. He could not be personally liable. On formation a company, a separate legal entity acquires the capacity to have its own rights and duties. Legal personality exists apart from its members. Consequences of Separateness: - Company estate is assessed apart from the estates of individual members. The debts of the company are Company’s debts and not that of its members. The sequestration of a member ≠ the liquidation of the company. - Profits of the company belong to the company and not the members. - Assets of the company belong to the company and not to its members. Members do not have proprietary rights. On liquidation members may share in the division of the assets of the company. - No one is qualified by virtue of membership to act on behalf of the company. Only those who are appointed as representatives, i.t.o the Articles, may bind the Company. Disregard of the separate existence of the corporate entity SALOMON and DADOO case SALOMON - a company has its own legal personality, one which is distinct from its members. It allows a company to perform juristic acts in its own name, as well as to sue and to be sued. Further, members and directors enjoy protection against personal liability. However, the court made it clear that in the event of fraud or dishonesty being proven, the separate corporate personality must be discarded