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Summary ODR320: EVERYTHING FOR SEMESTER TEST 1 (2023) PARTNERSHIPS AND CLOSED CORPORATIONS
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ODR 320NOTE: THESE NOTES WERE COMPILED BY KL DAVEY. PLEASE DO
NOT RESELL THEM. ALL CREDIT GOES TO THE RELEVANT
TEXTBOOKS, LECTURERS, LEGISLATION AND CASE LAW. I DO NOT
CLAIM ANY OF THIS WORK TO BE MY OWN. I AM NOT LIABLE FOR
ANY MISINFORMATION OR MISSING INFORMATION.
, OVERVIEW
Partnerships Close Corporations Companies
Legislation Contract Close Corporations Companies Act 71
Act of 2008
Legal personality No YES YES
Sequestration/Liquidated Sequestrated Liquidated Liquidated
Management General rule - partners General rule – Board of directors –
members (1-10) s 66
Representation Partner (mutual mandate) Member – s 54 or Board of directors or
or agent agent agent
General rule - Within
Scope of partnership S54 = Member
business (scope of business
is irrelevant)
Formalities Contract (oral or tacit) Registration and Registration and
disclosure disclosure
Ownership Partners co-ownership Member’s interest Shareholders
(%) Exception – NPC-
Members (no
Members)
Constitution Partnership agreement Founding Statement Memorandum of
Optional – Incorporation
Association Optional –
Agreement Shareholders’
agreement
Personal liability Yes No, save for certain No, save for certain
exceptions exceptions
Perpetual succession No Yes Yes
DISCLAIMER: THESE NOTES WERE COMPILED BY KL DAVEY. PLEASE DO NOT SHARE OR RESELL THEM. ALL
CREDIT GOES TO THE RELEVANT TEXTBOOKS, LECTURERS, LEGISLATION AND CASE LAW. I DO NOT CLAIM ANY
OF THIS WORK TO BE BY OWN. I AM NOT LIABLE FOR ANY MISINFORMATION OR MISSING INFORMATION.
, STUDY UNIT 2: PARTNERSHIPS
INTRODUCTION
General
A partnership is established through an agreement (no formalities are required so it
can be oral)
- Main aim of partnership à acquisition of a material / patrimonial benefit
> A partnership cannot be for the purpose of anything else.
- Partnerships cannot be created unilaterally.
LEGAL NATURE OF A PARTNERSHIP
Entity theory
Partnership à business structure which exists separately from members, it can
acquire assets and liabilities, but partners are liable for the liabilities
- Not used in SA.
Aggregate theory
Partnership à contractual association of specific persons which does not possess
legal personality.
- Rights and obligations of the partnership are the rights and obligations of the
partners.
- Used in SA.
Effects of aggregate theory
- Partnership is dissolved when membership changes (due to death, retirement of
admission of a member).
> Once dissolved à legal duties still remain intact (such as debt).
- Assets and liabilities belong to all the owners in undivided co-ownership shares.
DISCLAIMER: THESE NOTES WERE COMPILED BY KL DAVEY. PLEASE DO NOT SHARE OR RESELL THEM. ALL
CREDIT GOES TO THE RELEVANT TEXTBOOKS, LECTURERS, LEGISLATION AND CASE LAW. I DO NOT CLAIM ANY
OF THIS WORK TO BE BY OWN. I AM NOT LIABLE FOR ANY MISINFORMATION OR MISSING INFORMATION.
, Exceptions to the aggregate theory à when partnerships are treated as a separate
entity
1. Litigation – (someone is suing partnership)
- General rule: summons must include name of all partners
> But sometimes you miss a name à Defect in summons (now you need to
start again).
- Rules of Court: allow partnership to be sued in its business name
> For practical purposes due to the cumbersome nature of a defect in a
summons.
> Liability remains the same among partners.
2. Sequestration
- Each partnership has an application for sequestration brought against them
(multiple applications).
> Sequestration proceedings occur simultaneously and separately.
- The partnership estates and individual partners estates are sequestrated
> Any surplus from individual partners estate goes into the partnership
estate to pay off creditors of partnership estate (not individual partners
creditors).
> When the surplus is more than what is needed to pay off liabilities in the
partnership estate partners take a pro rata share of the surplus (according
to their contribution).
- During existence of the partnership à partners are jointly liable
> But once partnership dissolved: jointly liable à jointly and severally liable
- ‘Jointly and severally liable’
> Creditor can choose to claim back debt from one, two or all members.
> Right of recourse for the partner who has to pay all the debt à issue
summons against his partners
DISCLAIMER: THESE NOTES WERE COMPILED BY KL DAVEY. PLEASE DO NOT SHARE OR RESELL THEM. ALL
CREDIT GOES TO THE RELEVANT TEXTBOOKS, LECTURERS, LEGISLATION AND CASE LAW. I DO NOT CLAIM ANY
OF THIS WORK TO BE BY OWN. I AM NOT LIABLE FOR ANY MISINFORMATION OR MISSING INFORMATION.
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