Mrl2601 exam pack
2022/2023
CONTENTS
PAST YEAR EXAM QUESTIONS AND ANSWERS
OCTOBER / NOVEMBER 2021
MAY/ JUNE 2021
OCTOBER / NOVEMBER 2020
MAY/ JUNE 2020
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October/November 2021
MRL2601
Entrepreneurial Law
10...
100 marks
24 hours (plus additional time for submission)
QUESTION 1
1.1 Ann, Jack and Sam are three friends who wish to start their own
publishing company. While driving one Sunday afternoon, Jack comes
across the perfect office building. He wishes to purchase this building
on behalf of the proposed company. Advise Jack what the
requirements are that would need to be adhered to in terms of the
Companies Act 71 of 2008 in order to conclude a valid and binding
contract on the company’s behalf before its incorporation. Also list
the different common law alternatives that Jack could consider
instead. (12)
In terms of section 21 of the Companies Act 71 of 2008, any person wishing
to establish a company can enter into a contract with a third party on behalf
of a company that is not yet formed. After that company has been formed,
then the entered contract will be transferred to the company. In this case, as
Jack wishes to purchase the building on behalf of the proposed company, he
can make use of this section.
In terms of section 21 of the Companies Act, the contract will be valid and
binding if:
➢ it is entered by a person wishing to start a company on behalf of a
company that does not exist yet. In this case Jack would be doing so.
➢ the contract is in writing.
➢ the board of the company approves and accepts the terms and conditions
of the contract within a period of three months after its formation.
, In terms of common law, it is impossible for any person to enter into a
contract on behalf of a company that does not exist yet. However, there are
other alternatives available under common law Jack could consider. They
are;
(i) Cession and delegation
(ii) Nomination
(iii) Option
(iv) Contract for the benefit of a third party
1.2 Woodinn (Pty) Ltd has two shareholders, Tom and Sue who each
hold 50% of the issued share capital. Tom, Sue and Jack are
appointed as the company’s directors.
The Memorandum of Incorporation determines that Woodinn (Pty) Ltd’s
main business is manufacturing furniture. In addition, it stipulates that Jack
may conclude contracts not
exceeding the value of R500 000 on the company’s behalf. For any contract
exceeding this amount, Jack is required to get prior permission from the
board of directors.
The company was registered early in 2018. No annual general meeting has
been held as yet.
Answer the following questions with reference to the Companies Act 71 of
2008 and the facts provided above:
1.2.1 Jack buys a load of timber to the value of R2 million from Xander.
Jack does not seek permission from the board of directors as
required. Xander does not take the trouble to find out what the
company’s Memorandum of Incorporation determines but does not
suspect any irregularity in the agreement. Is the company bound to
the transaction?
(5)
In terms of section 20(1)(a) of the Companies Act, even if the Memorandum
of Incorporation of a company may restrict some powers on the legal
capacity of the company, that will not invalidate any contracts concluded by
the directors of the company. This technically means that any contract that
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