company law

Question 1

List any 6 (six) duties of a judicial manager (business rescue practitioner) in terms of the Company’s Act 28 of 2004. (6 marks)

Answer 1

• Assuming management of the company.
• Conduct management subject to the orders of court in a manner he or she
  considers economic of the creditors.
• To comply with any directive given by court in the final judicial management
  order.
• To keep accounting and financial statements of the company which its directors
  would have been obliged to keep.
• To convene Annual General Meetings (AGM) and other meetings as required.
• Convene meetings of the creditors of the company.
• To examine the affairs of the company before the judicial management order
  and ascertain whether any present or past director has contravened the Act or
  committed an offence and within 6 months of appointment submit such report to
  the Master of the High Court in terms of section 406 required to be submitted to
  the Master by the liquidator.

Question 2

Using legal terms, explain what is meant by the term company

Answer 2

a company is a legal entity made
up of an association of people, should they be natural, legal or a mixture of both
carrying on a commercial enterprise for profit or nonprofit purposes. A company
will always have a separate legal personality from its directors and shareholders.
A company can sue or be sued and has perpetual succession. An example of a
company in Namibia, pwc

Question 3

true or false

Answer 3

answer true or false

Question 4

A legal person can enter into marriage

Answer 4

false

Question 5

A natural person can be appointed as curator ad litem of a minor child

Answer 5

true

Question 6

Limited liability means that the shareholders of a company are liable for the debts of the company

Answer 6

false

Question 7

A shareholder holds members interest in a company

Answer 7

false

Question 8

Perpetual succession means that a company continues to operate even at the death of the incorporators

Answer 8

true

Question 9

With regards to the principle of separate legal personality of a company, discuss the legal principle as outlined in salomon v salomon

Answer 9

-Salomon conducted business in the name of the company to limit liability over the
debts of the company.
It was held that:
-In the case it was found that Salomon and the company was one person.
- It was explained further in the case that that is the reason why individuals induce
private companies to avoid risk of bankruptcy and increased facility to borrow money.
-conception of the existence of a company as a separate entity distinct from that of its
shareholders is a matter of substance.
-the company is at law a different person from its subscribers to the memorandum and
is not in law the agent of the subscribers.
-by means of a private company, a trade can be carried on with limited liability and
without exposing the persons interested in it in the event of failure.
4
Salomon was held liable for the debts of the company.

Question 10

What do you understand by the term piercing the corporate veil

Answer 10

When the court pierces the veil, it treats the liabilities of a company as those of the
shareholders and directors of a company and disregards the corporate personality of
the company, as expounded in Salamon v Salomon. After the curtain is pierced by the
courts, directors and shareholders of the company will be rendered powerless, liable
and unable to hide behind the curtain being the company

Question 11

What are Articles of Association of a company?

Answer 11

It is a legal document prepared by a company, to explicitly state the purpose of a
company, in other words, what the objective of the company is

Question 12

List any 4 (four) contents found in the Articles of Association

Answer 12

1. Share capital
2. Alteration of capital
3. Rights of shareholders
4. Issue of preference share
5. General meetings
6. Proxy
7. Board of directors and their responsibilities
8. Buy back of shares

Question 13

What section of the company’s Act 28 of 2004 deals with the alteration of Articles of Association

Answer 13

Section 67 of the Company’s Act 28 of 2004

Question 14

What is the manner used in terms of your answer in 4.3 above which allows for the alteration of Articles of Association

Answer 14

special resolution

Question 15

Explain what you understand by the term Turquand Rule while making mention in your answer the case which the principle is derived from

Answer 15

The tarquand rule was historically formed as an exception to the doctrine of constructive
notice and was designed to mitigate the severe effects of the doctrine of constructive
notice.
The tarquand rule is derived from the case of Royal British Bank v Tarquand which
was concerned with restrictions placed by the constitution of a company on the authority
of directors of the company to contract on its behalf.
The tarquand rule also protects bona fide third parties who are not aware of any internal
irregularities that affect the validity of their contracts with the company

Question 16

Define the term ultra vires doctrine

Answer 16

ultra vires doctrine may be defined as some act or transaction
entered into by a company, although not unlawful is against the legitimate powers of the
company

Question 17

List the 3 (three) types of authority directors of a company should have in order to act on behalf of a company

Answer 17

• Actual Authority
• Usual Authority
• Ostensible Authority

Question 18

Mention any type of business enterprise you know in Namibia

Answer 18

sole proprietorship
-partnership
-company
-close corporation
-business trust
-profit company
-nonprofit company
-personal liability company
-external company
-state-owned company
-public company
Public company

Question 19

1.1 Outline the key differences between a company and a close corporation

Answer 19

Company
• A company has share capital.
• Also comprises of a director(s) and shareholders who have a right to hold shares in the company.
• Companies having a share capital may be divided into private & public companies.
• Can sue and be sued.
• Has a separate legal personality separate from its shareholders and directors.
• Has perpetual succession.
• Profits and liabilities of the company belong to it and not the shareholders and directors.

Close corporation
• It is a simple, cheap and flexible form of business enterprise.
• Abbreviated as CC
• It is easy to manage
• Members hold members interest
• It has a separate legal personality separate from its members
• May not have more than 10 members
• May be set up by a single person, object is not always to make profit

Question 20

outline what you understand by pre-incorporation contracts

Answer 20

Pre-incorporation contracts form part of our company law and found in Section 42 of the Companies Act.
In order to enable a non-existing company to become a party to a contract, section 35 of the Companies Act makes provision for a company to adopt and ratify a pre-incorporation agreement which has been concluded on behalf of the non-existing company

Question 21

when will a pre-incorporation contract have effect?

Answer 21

• contract in writing
• concluded by acting agent or trustee for the company that is to be formed
• MOI must incorporate the adoption or ratification of the contract at the time of registration
• two copies of the contract , certified by the notary public lodged with application to register MOI and AOA

Question 22

Profit companies are divided into 4 (four) categories, list them

Answer 22

1. The private company
2. The public companies
3. The personal liability company
4. State- owned company

Question 23

A company will only be converted into a close corporation when certain requirements are met, list them

Answer 23

1. A company has 10 or fewer members
2. All the shareholders are natural persons
3. Each shareholder will become a member of the close corporation
4. The auditor has issued a certificate

Question 24

Does a company have perpetual succession

Answer 24

yes

Question 25

In the case of S v De Jagger, it was held that profits of the company belong to the company, based on this judgement, discuss the elements of the case

Answer 25

The company’s profits belong to the company itself and not the shareholders, a very important case to note here is S v De Jager, the accused , a director and shareholder of a company was charged with theft and obstructing the company’s funds for his own purposes.
The Appellant Division rejected the accused’s defence stating that a company is a separate legal person and owns funds of the company and that the directors manage the affairs of the company in a fiduciary capacity to it and furthermore that shareholders general participation in the company’s assets ONLY comes up upon winding up subject to the claims of creditors

Question 26

2 A company since having a separate legal personality may contract with its shareholders, with the said in mind, discuss the judgment as outlined in the case of Lee v Lee Air force Ltd

Answer 26

In the case of Lee v Lee’s Air Force Ltd, He was the director and the controlling shareholder at Lee’s Air Farming Ltd, Lee was also employed by the company as its chief pilot.
Lee was killed in a plane crash, his widow claimed compensation from the Workmans Compensation Act of 1922, the question before the court was whether Lee was a ‘’worker’’, the court ultimately held that it would have been impossible for Lee as the director of the company to enter into a contract with himself…judgement of Salomon v Salomon & co Ltd was applied in reaching judgement in Lee’s case. Both cases expounded upon the difficulties faced by most natural persons in playing dual capacities and that such person could in one capacity give orders to himself in another capacity

Question 27

List and discuss the different types of partnership available within our law

Answer 27

1. General Partnership
   The partners are jointly and severally liable for the debts of the partnership.
2. Anonymous/sleeping partnership
   The anonymous partner is not known to the public and is liable to his partners only for his pro-rata share of the debts or eventual shortfall.
3. Commanditarian partnership
   Such a partner is not known to the public, he shares in profits and losses but his liability is restricted to his specific contribution.

Question 28

4 Explain what you understand by the law of agency

Answer 28

• The law of agency states that an individual should have authority delegated to them in order to act on behalf of the company.
• Authority is a concept of agency law.
• In terms of the law of agency where a director of a company contracts on behalf of the company, for the director to do so he must have the authority.