Week 5 - Corporate Formation & Dissolution

Question 1

what happens when a company is ring-fenced?

Answer 1

has restrictive MOI provisions and this gives outsiders constructive notice thereof

Question 2

would an external / foreign company be required to register as a company in SA?

Answer 2

• foreign company carrying out business in SA – compelled to register with CIPC within 20 days after it begins conduct
• if party to employment contract in SA or has pattern of activities in SA over 6months = plans to continually engage in bus in SA

Question 3

which provisions is a share block company subject to?

Answer 3

Companies Act

Share Block Control Act

Question 4

what is a share block scheme?

Answer 4

a scheme ito which a share confers a right to / an int in the use of immovable property to the holder

Question 5

purpose of a profit company?

Answer 5

financial gain

Question 6

characteristics of a nonprofit?

Answer 6

• at least one of its obj must be public benefit or cultural/social activities
• may acquire and hold shares
• no financial benefit or profit except for public benefit, remuneration or compensation for expenses incurred when furthering objectives

Question 7

composition of a nonprofit?

Answer 7

• min 3 directors
• no SH, only members (not entitled to assets)
• doesn’t need to have members, can be run solely by BoD

Question 8

what must be in a private company’s MOI?

Answer 8

• prohibiting offering shares to public

- restricts share transfers (no secondary market)

Question 9

what happens when transferring shares in a private comp?

Answer 9

• board must approve transfer, OR

- you must first offer them to existing SH and if they decline, you can sell (protects control of company)

Question 10

what are the characteristics of PLC?

Answer 10

• same MOI as private company

- directors are jointly and severally liable for debts which arise during term of office (contract debts)

Question 11

what are the SOC characteristics?

Answer 11

• owned and controlled by municipality or national executive or falls under Public Finance Mgmt Act
• provide g/s and are financed by taxes, levies

Question 12

what is the NOI?

Answer 12

document filed with CIPC to inform them of the inc of a particular company so that it can be registered

Question 13

information contained in the NOI?

Answer 13

• incorporator details
• directors
• RF provisions
• office addy
• details of secretary, auditor, members
• fin y/e of company
• proposed name

Question 14

what’s in the MOI?

Answer 14

• rights duties resp of SH, directors, etc in relation to company
• key features of company

Question 15

how many ppl to incorporate?

Answer 15

• 1 for profit (may be organ of state)

- 3 for NPC (may be JP, org of state)

Question 16

what will the business file with CIPC when wanting to inc?

Answer 16

NOI, prescribed fee, a copy of the MOI

Question 17

prescribed forms for MOI?

Answer 17

long and short

- so that legal expertise and knowledge is not needed for designing an MOI unique to company

Question 18

long form?

Answer 18

detailed provisions which can be customized

Question 19

what does the CIPC do when it receives the NOI?

Answer 19

• assign unique reg number w company
• determine if name is compliant with laws
• if no probs, enter info into comp register
• endorse the NOI and MOI copy with it
• issue reg certificate to be delivered to company

Question 20

requirements for words in name?

Answer 20

• each word must be expressed using the alphabet that is commonly used for writing in any official SA language
• numbers = words or numerals (Arabic, Roman)
• dates must be in words or Arabic numerals

Question 21

if words not in a language that is one of the official SA languages?

Answer 21

must either have certified translation of words or declare that words represent a TM the company is legally allowed to use

Question 22

if NOI fails to meet name requirements?

Answer 22

CIPC will still register them using its registration number and providing it a unique identity that will enable it to function as a JP

Question 23

failing to include name with suffix?

Answer 23

can be considered abuse of sep leg personality and can render directors personally liable in certain cases

Question 24

prohibited names?

Answer 24

• confusingly similar to another
• confusingly similar to name that has been defensively registered
• name which another person holds IP rights ito of Bus Names Act, TM Act or Merch Marks Act

Question 25

the comapny name may not falsely imply suggest as would reasonably mislead a person to believe incorrectly that the company is?

Answer 25

- assosicated w another person - is an org of state - owned managed conducted by a person with a specific educational designation - enjoys patronage of gov/head of state

Question 26

offensive symbols in name?

Answer 26

- war propaganda - violence incitement - advocacy of hate - incitement of harm

Question 27

how can a name be reserved?

Answer 27

- file an application, pay prescribed fee - reserve with CIPC, meet requirements - may expire after 6 months and can be renewed at 60 days at a time (with adequate reason)

Question 28

can a reservation be transferred?

Answer 28

- yes, only while it is reserved, subject to fees; file notice of transfer - will need to provide evidence of direct interest in the name

Question 29

defensive reservation?

Answer 29

- may be done to prevent the name from being used by another company while preparing for corporaton, or with a view to change existing name. must be reserved with intention to use, not sell. - can also be registered not reserved - two years and extensions by two years - will need to provide evidence of direct interest in the name

Question 30

commission MAY reject NOI if?

Answer 30

incomplete, not properly completed

Question 31

comm MUST reject if?

Answer 31

- fewer directors than required | - reasonably believes the directors are disqualified and remaining are too few

Question 32

if name has no abbr?

Answer 32

company will alter the name

Question 33

if same name as other comp / name is reserved?

Answer 33

use reg no as interim name and invite comp to file amended MOI

Question 34

if name confuses/misleads?

Answer 34

- notify persons affected | - refer to tribunal

Question 35

if name incites violence?

Answer 35

refer to human rights comm | choose to refer to tribunal

Question 36

what is a promoter?

Answer 36

helps with pre-inc contracts and enters into them on behalf of the business. undertakes to form a comp with ref to a given project and to set comp going.

Question 37

when is promoter liable?

Answer 37

- if comp not inc | - if comp rej

Question 38

which section regulates pre-inc contracts?

Answer 38

section 21

Question 39

section requirements for PIC?

Answer 39

- PIC must be in writing - entered into pre-inc - between 3P and promoter on behalf of comp - intends for comp to be bound when it exists - comp only bound by raitification (has 3 months post inc to reject/rat; if neither = deemed rat)

Question 40

which Comp act for winding up comps?

Answer 40

``` solvent = 2008 insolvent = 1973 ```

Question 41

definition of insolvent countries?

Answer 41

can't pay its debts within 3 weeks of demand or failing to satisfy warrant of execution

Question 42

how can the winding up be voluntarily initiated?

Answer 42

- special resolution - security to master for pmt of debts within 12 months of commencement of winding up - consent from master to dispense with security

Question 43

how the liquidator works?

Answer 43

- master appoints - creditors may nom, but master can decline and remove if not satisfactory - oversses process and will draw up accounts to ensure cred are paid - entitled to reasonable rem.

Question 44

who can court order a wind up?

Answer 44

- comp = resolution and asks court (voluntary) - business rescue practitioiner = can't rescue bus - creditor = jsut and equitable to windup - directors/SH = deadlock in mgmt / just+equ - SH = fraud, illegal actions