Chapter 4 FORMATION OF COMPANIES AND THE COMPANY CONSTITUTION Flashcards
What are the underlying philosophies and principles of the Companies Act 71 of 2008?
- Formation of a company is a right
- Constitutional right to freedom of association
- Common-law right to freedom of contract
- Formation of companies promotes commercial enterprise and the growth and development of the economy.
What is the position regarding the incorporators in the 2008 Act?
- One or more incorporators for a profit company regardless of domain
- Three persons acting in concert for a non-profit company
- Profit company may be incorporated by an organ of state
- Non-profit may be incorporated by a juristic person or an organ of state.
What is the procedure for incorporation?
- Signing and completion of MOI
- File with the CIPC a NOI, a copy of the MOI and a payment of the prescribed fee.
What is an MOI?
The sole founding or governing document of the company, setting out rights, duties and responsibilities of the shareholders, directors and others within and in relation to the company and various other matters.
What is an NOI?
A document setting out the name of the company, its initial directors, its registered office and the date of its financial year end and it includes notice of the appointment of the first company secretary, auditor or audit committee.
What happens if the MOI contains any restrictive conditions, additional requirements for its amendment in addition to the requirements of section 16 or any prohibitions on the amendment of any provision of the MOI?
- Then the NOI must contain a prominent statement drawing attention to each such provision together with its location in the MOI.
- Company name must be followed by RF.
What is the process of registering a company?
CIPC issues:
1. a unique registration number to the company
2. Enter certain prescribed info concerning the company, including the company name, in the companies register
3. Endorse the NOI and the copy of the MOI
4. Registration certifcate.
What are the two kinds of rejections of the NOI by the CIPC?
- Mandatory rejection
- Discretionary rejection
What are the grounds for mandatory rejection?
- Where the number of initial directors of the company is less than the prescribed statutory minimum
- Where the Companies Commission reasonably believes that any of the initial directors are disqualified from being appointed as directors of the company, with the result that the remaining initial directors are fewer than the prescribed statutory minimum
What are the grounds for discretionary rejection?
Where it or anything required to be filed with it is either incomplete or improperly completed.
What does ‘ring-fenced’ mean?
The MOI stipulates restrictive conditions or prohibits the amendment of any provisions.
What is the purpose of RF?
Alert 3rd parties to the restrictions or prohibitions on the amendment of certain provisions of the MOI so that they may exercise appropriate caution.
What are the first group of statutory restrictions in company names?
- Company name must not be the same as or confusingly similar to the name of another entity, barring cases of company groups
- Company name may neither be the same as nor confusingly similar to a name registered as a defensive or as a business name under the Business Names Act or to a trademark that has been registered or filed for registration or is a well-known trademark or to a mark, word or expression the use of which is protected in terms of the Merchandise Marks Act.
Which common law principle is relevant to the phrase ‘confusingly similar’?
The principle of reasonable likelihood.
What is the delict of passing off?
It is a common-law principle that applies where the use of a name could result in a reasonable likelihood of members of the public being confused into believing that the business of the company is, or is connected with, that of another.
What are the two elements of passing off?
- That confusion or deception is reasonably likely to ensue
- If confusion or deception does ensue, it will probably cause damage to the application.
What is the second group of restrictions on company names?
Names that falsely imply a non-existent association.
What is the 3rd group of statutory restrictions?
Names that are offensive or unconstitutional forms of expression.
What happens in the event that the proposed name of the company is the same as that of another company?
CIPC will nonetheless register the company by using an interim name instead of the proposed company name.
What does an MOI consist of?
- Unalterable provisions
- Alterable provisions