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MRL2601 EXAM PACK
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MRL 2601NOV/OCTOBER 2017
SECTION A
QUESTION 1
1.1 A profit company’s main objective is financial gain for its shareholders, a
profit company may be incorporated by one all more persons and under
Companies Act of 2008 they is no limit to the number of shareholders it can
have. Four different types of company fall under this category namely; state
owned companies, public companies, personal liability companies and
private company.
On the other hand a non-profit company is a company whose main object
must relate to social activities, public benefit, cultural activities or group
interests.
1.2 The doctrine of constructive notice provides that third parties dealing with
a company are deemed to be fully acquainted with the contents of the
public documents of the company. However section 19(4) partially
abolishes this doctrine. The exception is that a person is deemed to have
knowledge of any provision of a company’s MOI in terms of section 15(2)
relating to any restrictive or procedural requirement impeding the
amendment of a specific provision of the MOI prohibiting its amendment.
This is subject to the condition that the company’s name includes the
letters “RF” and the Notice of Incorporation contains a prominent
statement drawing attention to such a provision.
1.3 A company’s MOI be amended if 10% of the holders of voting share can
propose a resolution to amend the MOI. he amendments maybe made
formal or informal special resolutions, a notice of amendment must be filed
, and takes effect once acceptance of notice by CIPC, or in the case of a name
change it can be done on the issue of amended registration certificate.
1.4 The Memorandum of Incorporation is the founding document of the
company. It sets out the relationship between the company and its
shareholders, the company and its directors, the company and other
parties as well as the company by other third parties. The MOI should
comply with the provisions of the Companies Act. Any rules or procedure
contravening the Companies Act are void to the extent of the
inconsistence. Thus rules and procedure inconsistent with the Act are thus
void and of no force.
1.5 A private company is prohibited by the companies Act from offering its
securities to the public and the transferability of its securities is restricted.
The capital is provided by private individuals who decides how and who
should run the company. On the other hand a public company is not a state
owned company but a private company with shares listed and traded on
the stock market. Its major advantage is being able to source capital from
the public and any other investor.
1.6 Section 1 of the Companies Act describes a pre-incorporation contract as a
written agreement entered into before they incorporation of a company by
a person who purports to act in the name of, or on behalf of the company
with the intention or understanding that the company will be incorporated,
and will thereafter be bound by the agreement. A person who enters into
such a contract is held jointly and severally liable with any such other
person for liabilities emanating from the pre-incorporation contract if the
incorporation does not take place, or the company does not ratify any party
of the agreement after incorporation. The advantage of pre-incorporation
under common law is that the promoter concludes the contract under his
name but after the company is registered can cede the debt without
concurrence of the debtor. Under section 21 the a written agreement is a
requirement and the promoter is bound by the contract for liability in case
the company is not incorporated.
, 1.7 Since the coming into effect of the Companies Act 2008 and in particular
section 13 of the Act CC’s can no-longer be incorporated in South Africa.
QUESTION 2
2.1
2.2 The company is bound by the contract concluded by Ugochukwu because
of the operation of section 20(7) of the Companies Act 2008. The section
provides that a person dealing with a company in good faith is entitled to
assume that the company has complied with all of the internal procedures
requirements in terms of its MOI and any rules unless the person knew or
reasonably ought to have known of any failure by the company with its
formal or procedural requirements. There is no indication from the that
Wiseman knew or reasonably ought to have known that Ugochukwu failed
to comply with procedures and that he had acted in bad faith.
2.3.1 A company may issue the following shares;
Preference shares
Ordinary shares and
Deferred shares
2.3.2 Shares can confer the following rights to its holders;
The right to vote
The right to information
The right to receive a dividend that has been declared
The right to share in the assets that are left on the winding up of a company
after the company’s creditor’s creditors have been paid up.
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