QUESTION 1
Fill in the missing word/s to complete the statement. In your answer provide
only the question number and the answer. Example: 1.11 – Shareholder.
1.1 The process by which the court disregards the separate legal personality of a
company or a close corporation in order to hold ind...
QUESTION 1
1.1 lifting the corporate veil
1.2 founding statement
1.3 public
1.4 estoppel
1.5 debenture
1.6 quorum
1.7 ex officio director
1.8 association agreement
1.9 transformative constitutionalism
1.10 pre-incorporation contract
QUESTION 2
2.1 The contract concluded by Mr Hoodlum and Mr Brothel may be considered valid and
enforceable against the company, but only to the extent that it falls within the powers of
Mr Hoodlum as a director of the company. According to the Memorandum of
Incorporation of Guns 'n Roses (Pty) Ltd, the main business of the company is the
manufacturing and sale of toy guns, which suggests that the purchase of a nightclub is
outside the scope of the company's business objectives. However, the board resolution
authorizing Mr Hoodlum to act on behalf of the company may have impliedly or explicitly
, extended his powers to conclude contracts that are not directly related to the company's
main business.1
In this case, since Mr Hoodlum acted within the scope of his authority, the contract may
be considered valid and enforceable against the company. However, this does not
necessarily mean that the contract is binding on the company.2 The company's
Memorandum of Incorporation may provide for certain procedures or requirements that
must be followed before a director can enter into a contract that is outside the scope of
the company's main business. If such procedures were not followed, the contract may
be considered invalid and unenforceable against the company.
In light of this, it is possible that Mr Orthodox may be able to challenge the validity of the
contract by arguing that Mr Hoodlum exceeded his powers as a director or that the
contract was entered into without complying with the required procedures.3 In this
case, the court may declare the contract invalid and unenforceable against the
company.
2.2 As a shareholder of Guns 'n Roses (Pty) Ltd, Mr Orthodox has several remedies
available to him if he is unhappy with the purchase of the nightclub. One remedy is to
seek an order from the court to set aside the contract on behalf of the company. This
may be done by arguing that Mr Hoodlum exceeded his powers as a director or that the
contract was entered into without complying with the required procedures.4
Another remedy available to Mr Orthodox is to seek an order from the court to restrain
1 Companies Act 71 of 2008, s 66(1)
2 Only Study Guide for MRL2601, university of South Africa, Pretoria
3 Companies Act 71 of 2008, s 66(1)
4 Companies Act 71 of 2008, s 66(1)
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