Summary LML4801 company law notes.

A. Introduction Definition: a company is “a company incorporated under Chapter IV of the Companies Act and includes any body which immediately prior to the commencement of this Act was a company in terms of any law repealed by this Act”. o Application of the Act: Section 2 (i) Every company incorporated under this Act. (ii) Every external company = one incorporated outside SA/Namibia but that lodged its memorandum in South Africa/ Namibia and has a place of business in South Africa/ Namibia. (iii) A company or body which existed prior to the commencement of the Companies Act. o Place of business: any place where the company transacts and holds itself out as transacting business and includes a share transfer with share registration office. o Limitation: Section 3 provides that the Act does not apply to building societies, pension funds, insurance companies etc. as these have their own Acts and are governed thereby. In the case of inconsistency between the Act and the specific Act this Act will also not apply. The question is, however, whether the common law provisions of company law will apply to such entities. This latter question was deliberated on in William James Nieuwoudt & Others v Vrystaat Mielies (EDMS) BPK1wherein the court had to determine if the Turquand rule applied to Trusts. This case must be read as it also contained reference to cases that dealt with whether other company law principles applied to e.g. trade unions. In hoc casu the facts were that a Trustee entered into a contract of cession and purported to bind the Trust without the consent of the 1 William James Nieuwoudt & Others v Vrystaat Mielies (EDMS) BPK delivered on 28th November 2003 1 Company law other Trustee. The Trust deed required the unanimous assent of both Trustees in the event that the Trust had only two Trustees (as was the case here). The appellants wanted to get out of the contract on the basis of a lack of authority. The respondents wanted to hold them to the contract. The question was whether or not the Turquand rule applied to Trusts such that the Trust will be bound to the contract. Page 3 of the judgment contains the essence of the Turquand rule and the arguments by respondent to found a case based on the Turquand rule. The court held as follows: a. That there are cases to the effect that the Turquand Rule applies to trade unions2 and municipalities3 . b. The respondent relied on the judgment in Man Truck & Bus (SA) v Victor en Andere4 to argue that the rule applies to Trust as well. c. Unfortunately the court of appeal did not decide the point and rather based their decision on a construction of a clause in the Trust deed. B. The concept of a company. o Registration of CC or Co endows it with legal personality. It can acquire its own rights and liabilities. o The risk of the contributors extends no further than the loss of the amount which they have contributed to the venture as capital. o The Co. and CC who enjoy the benefit of perpetual succession that their continued legal existence is not influenced by any change n membership. o The shareholders of a Co. do not usually participate in management of the company. o Shareholders exercise ultimate control over the Company (as opposed to a CC where each member is entitled to participate in management and there is no board of directors). 2 Mine Workers’ Union v Prinsloo 1948 (3) SA 831 (A). 3 Potschefstroomse Stadsraad v Kotze 1960 (3) SA 616 (A). 4 Man Truck & Bus SA Ltd v Victor en Andere 2001 (2) SA 562 (NC) 2 Company law o CC is simpler and less expensive. C. The Company as a Legal Person. o The definition of a company above does not really do justice to it. It can take so many forms that it is actually incapable of a definition. o Therefore, generally it is an association of persons for the common object of the acquisition of gain; this does not however apply to all companies. E.g. the s21 company does not have the object of acquiring gain. o Company can own assets Company can be an employer Company can be a party to a contract Company can litigate (sue and be sued) Company has rights and duties o But for obvious reasons, the company has to act via organs or agents. D. Acquisition of Legal Personality. o How? a. Separate Act (CC Act) b. General enabling Act (Co. Act) c. Conduct (if it conducts itself as a legal person and complies with certain requirements). {Only if the association is not carrying on business that has as its object the acquisition of gain. Why? If it does then it will fall foul of s30 & s31} o NB: s30 & s31.