IIE Learn Module Outline BUEL6212

Business Enterprises Law

BUEL6212
MODULE OUTLINE 2023
(First Edition: 2023)

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of 1978, no part of this document may be reproduced or transmitted in any form or by any
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institution under the Higher Education Act, 1997 (reg. no. 2007/HE07/002).
Company registration number: 1987/004754/07.

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IIE Learn Module Outline BUEL6212

Table of Contents
Introduction ............................................................................................................................... 3
Using this Module Outline .......................................................................................................... 4
This Module on Learn ................................................................................................................. 5
Icons Used in this Document and on Learn ................................................................................ 6
Module Resources ...................................................................................................................... 7
Module Purpose ....................................................................................................................... 10
Module Outcomes .................................................................................................................... 10
Assessments ............................................................................................................................. 11
Module Pacer ........................................................................................................................... 14

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IIE Learn Module Outline BUEL6212

Introduction
Entrepreneurship is fundamental to the world of commerce: it finds its seeds in the bartering
that took place between people in early times. Although trading has become more complicated
in the 21st century, it is not, in essence, so different from those early transactions. What has
changed fundamentally is the nature of the entities through which entrepreneurs choose to
operate their businesses. It is not a case of “one size fits all”. Various factors need to be taken
into account by the entrepreneur when choosing the structure for the business. The structure
of the business may also need to be changed to accommodate the changing circumstances in
the life cycle of the business.

This module is intended to introduce the various business structures available, and the nature
and characteristics of each structure. Applicable legislation ruling the establishment and
maintenance of the different structures will be considered, as well as the pros and cons of the
different structures under different circumstances, and the circumstances which may lead to
a change or adjustment of the structure.

Companies may be regarded as the structures of choice and, accordingly, a considerable part
of this module will be devoted to understanding the applicable laws; however, partnerships,
close corporations and business trusts will also be studied.

The King Committee published the King Report on Corporate Governance IV (King IV) on 1
November 2016 which will be applicable in respect of companies with financial years starting
on or after 1 April 2017. King IV replaces King III in its entirety. It has been drafted as a
framework, and consequently provides less detail than King III.

Furthermore, King IV deals with Corporate Governance, which is the subject matter of the
Corporate Administration and Governance module.
(COGA7312/GOET7312/COGO8412/CONR8212) offered as part of the final year of study.
Company law and corporate governance are inextricably linked, and it is not always easy to
separate them. As a generalisation, this module will not deal with corporate governance.

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IIE Learn Module Outline BUEL6212

Using this Module Outline

This module outline has been developed to support your learning. Please note that the
content of this module is on Learn as well as in the prescribed material. You will not succeed
in this module if you focus on this document alone.

• This document does not reflect all the content on Learn, the links to different resources,
nor the specific instructions for the group and individual activities.
• Your lecturer will decide when activities are available/open for submission and when
these submissions or contributions are due. Ensure that you take note of
announcements made during lectures and/or posted within Learn in this regard.

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IIE Learn Module Outline BUEL6212

This Module on Learn

Learn is an online space, designed to support and maximise your learning in an active manner.
Its main purpose is to guide and pace you through the module. In addition to the information
provided in this document, you will find the following when you access Learn:

• A list of prescribed material;

• A variety of additional online resources (articles, videos, audio, interactive graphics, etc.)
in each learning unit that will further help to explain theoretical concepts;
• Critical questions to guide you through the module’s objectives;
• Collaborative and individual activities (all of which are gradable) with time-on-task
estimates to assist you in managing your time around these;
• Revision questions, or references to revision questions, after each learning unit.

Kindly note:

• Unless you are completing this as a distance module, Learn does not replace your
contact time with your lecturers and/or tutors.
• BUEL6212 is a Learn module, and as such, you are required to engage extensively with
the content on the Learn platform. Effective use of this tool will provide you with
opportunities to discuss, debate, and consolidate your understanding of the content
presented in this module.
• You are expected to work through the learning units on Learn in your own time –
especially before class. Any contact sessions will therefore be used to raise and
address any questions or interesting points with your lecturer, and not to cover every
aspect of this module.
• Your lecturer will communicate submission dates for specific activities in class and/or
on Learn.

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IIE Learn Module Outline BUEL6212

Icons Used in this Document and on Learn

The following icons are used in all your modules on Learn:

A list of what you should be able to do after working through the learning
unit.

Specific references to sections in the prescribed work.

Questions to help you recognise or think about theoretical concepts to be

covered.

Sections where you get to grapple with the content/ theory. This is mainly
presented in the form of questions which focus your attention and are
aimed at helping you to understand the content better. You will be
presented with online resources to work through (in addition to the
textbook or manual references) and find some of the answers to the
questions posed.

Opportunities to make connections between different chunks of theory in

the module or to real life.

Real life or world of work information or examples of application of

theory, using online resources for self-exploration.

REMEMBER:

You need to log onto Learn to:

• Access online resources such as articles, interactive graphics, explanations, video clips,
etc. which will assist you in mastering the content; and
• View instructions and submit or post your contributions to individual or group activities
which are managed and tracked on Learn.

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Module Resources
Prescribed Davis, D (ed) 2021 Companies and Other Business Structures in South
Material (PM) Africa (5th ed; 1st impression) Oxford University Press: Cape Town
for this Module ISBN: 9780190758783
(Referred to as “PB”)
Prescribed Readings:
Mashingo & Schoeman Stokvels as an instrument and channel to extend
credit to poor households in South Africa (2012) 5 Journal of Economic
and Financial Sciences 49.
Prescribed case • Airport Cold Storage (Pty) Ltd v Ebrahim 2008 (2) SA 303 (C)
law for this • Basson v on-Point Engineers (Pty) Ltd 2012 JDR 2126 (GNP);
module [2012] ZAGPPHC 251
• Braun v Blann and Botha NNO 1984 (2) SA 850 (A)
• Butters v Mncora 2012 (4) SA 1 (SCA)
• Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd 1995
(4) SA 790 (A)
• Crookes NO v Watson 1956 (1) SA 277 (A)
• Cuninghame and another v First Ready Development 249
(association incorporated in terms of section 21) 2010 (1) All SA
473 (SCA)
• CyberScene Ltd v I-Kiosk Internet and Information (Pty) Ltd 2003 3
SA 806 (C)
• Da Franca v Exhaust Pro CC [1996] 4 All SA 503 (SE)
• Da Silva and others v CH Chemicals (Pty) Ltd 2008 (6) SA 620 (SCA)
• Dadoo Ltd v Krugersdorp Municipal Council 1920 AD 530
• De Jager v Olifants Tin ‘B” Syndicate 1912 AD 505
• Dorbyl Ltd v Vorster 2011 (5) SA 575 (GSJ)
• Fisheries Development Corporation of SA Ltd v Jorgensen 1980 (4)
SA 156 (W)
• Gatenby v Gatenby 1996 (3) SA 118 (E)
• Ghirsi v Timber Developers (Pty) Ltd 2007 (4) SA 536 (SCA)
• Gold Fields Ltd v Harmony Gold Mining Co Ltd 2005 (2) SA 506
(SCA)
• Hülse-Reutter v Gödde 2001 (4) SA 1336 (SCA)
• J & K Timbers (Pty) Ltd t/a Tegs Timbers v GL & S Furniture CC
2005 (3) SA 223 (N)
• Kukama v Lobelo JDR 0663 (GSJ); [201] ZAGP JHC 60
• La Luca Sands Share Block v Barkhan 2010 (6) SA 421 (SCA);
[2010] ZASCA 132

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• Land and Agricultural Bank of South Africa v Parker and Others

2005 (2) SA 77 (SCA)
• Livanos v Oates [2012] ZAGPJHC 30
• MMA Architects v LuyandaMpahlwa [2011] ZAWCHC
• One Stop Financial Services (Pty) Ltd v Neffensaan Ontwikkelings
(Pty) Ltd and Another (20028/14) [2015] ZAWCHC 89
• Pezzutto v Dreyer 1992 (3) SA 379 (A)
• Phillips v Fieldstone Africa (Pty) Ltd [2004] 1 All SA 150 (A)
• Ponelat v Schrepfer 2012 (1) SA 206 (SCA); [2010] ZAWCHC 196
• Robinson v Randfontein Estate Gold Mining Co Ltd 1921 AD 168
• Royal British Bank v Turquand (1856) 6 E&B 327
• Salomon v Salomon & Co Ltd [1897] AC 22 (HL)
Other • DTI South African Company Law for the 21st Century: Guidelines
prescribed for Corporate Law Reform published in GG 26493 GN 183 dated
material for this 23 June 2004
module • Business Partners Limited Choosing a legal entity for your business
enterprise 25 July 2012, available at
https://www.uschamber.com/co/start/startup/choosing-legal-
entity-for-small-business [Accessed 12 January 2023].
• SAICA Mandatory Audit Firm Rotation” Discussion Paper:
Considering Mandatory Audit Firm Rotation (MAFR) (and other
Related Measures) as Possible Means of Enhancing Auditor
Independence, available at
http://www.saica.co.za/Portals/0/documents/MAFRDiscussionPa
per.pdf?Reference_ID=45018384 [Accessed 12 January 2023].
• The King IV Report on Corporate Governance for South Africa
2016 (you only need to know the content of the King codes
specifically referred to in this MG or in the prescribed textbook)
Recommended • The following titles include information related to this module and
Additional may be consulted as additional resources. Please note, however,
Reading that you will not be tested on any content from these titles.
• Benade, ML (ed) (2008) Entrepreneurial Law (4th ed) LexisNexis:
Durban
• Cassim, FHI (ed) (2012) The Law of Business Structures (2nd
impression) Juta: Cape Town
• Delport, P (2014) New Entrepreneurial Law LexisNexis: Durban
• The King III Report on Corporate Governance for South Africa
2009

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Digital and web Additional digital resources are also available for this module.
resources • IODS King IV Report http://www.iodsa.co.za/page/KingIVReport
[Accessed 12 January 2023].
• Deloitte King IV: Bolder than Ever
https://www2.deloitte.com/za/en/pages/africa-centre-for-
corporate-governance/articles/kingiv-report-on-corporate-
governance.html [Accessed 12 January 2023].
• IRBA How independent is your auditor and audit committee? 11
Jun 2016 http://www.irbalearning.co.za/news-headlines/press-
releases/how-independent-is-your-auditor-and-audit-committee
[Accessed 12 January 2023].
• IRBA The IRBA announces measures to strengthen auditor
independence and enhance investor protection 29 August 2016
https://www.irba.co.za/news-headlines/press-releases/the-irba-
announces-measures-to-strengthen-auditor-independence-and-
enhance-investor-protection [Accessed 12 January 2023].
• SAICA Mandatory Audit Firm Rotation” Discussion Paper:
Considering Mandatory Audit Firm Rotation (MAFR) (and other
Related Measures) as Possible Means of Enhancing Auditor
Independence http://www.saica.co.za/Portals/0/documents/MAF
RDiscussionPaper.pdf?Reference_ID=45018384 [Accessed 12
January 2023].
Essential web Refer to the library website on this URL:
resources https://iielibraryconnect.iie.ac.za/e-shelf/law-resources [Accessed 12
January 2023].
(You will also find the resources online under “Library/e-shelf”.)
Module You will find an overview of this module on Learn under the Module
Overview Information link in the Course Menu.
Assessments Find more information on this module’s assessments in this document
and on the Student Portal.

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Module Purpose
The purpose of this module is to introduce students to the different forms of enterprise
structures commonly found in South Africa. Students will be equipped to deal with problems
relating to a range of enterprise structures.
Module Outcomes
Define the language, terminology, concepts and principles of the law of
MO1
enterprise structures.
Apply the principles of the law of enterprise structures to practical problem
MO2 situations commonly encountered in the management of various business
entities.
Evaluate the elements of the law of enterprise structures in the context of
MO3 matching the most appropriate enterprise structure with the most appropriate
vehicle (legal entity) for that kind of business.
MO4 Apply legislative, common law principles and case law to a given scenario.

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Assessments
Integrated Curriculum Engagement (ICE)
Minimum number of ICE activities to complete 4
Weighting towards the final module mark 10%

Formatives Test 1 Test 2

Weighting 25% 30%
Duration 1 hour 1 hour
Write/Submit after LU4 LU8
Learning Units covered 1-4 5-7
Resources required None None

Summative Examination
Weighting 35%
Duration 2 hours
Total marks 120
Open/Closed book Closed book
Resources required None
Learning Units covered All

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Assessment Preparation Guidelines

Format of the Assessment Preparation Hints
Test 1
Test 1 will be based on • Ensure that you work through all the relevant activities,
learning units 1-4 • exercises and revision questions on Learn and in your
The test will include both textbook.
theory and application-type • Brainstorm possible questions based on the learning.
questions. • outcomes and objectives provided. Then complete
You will be expected to these as practise-tests.
respond to short theory- • During both your preparation for the test and during
based questions, as well as the test itself, pay attention to the instruction words
longer application type (like list, apply, describe etc.) and to the mark
questions. allocations of each question to ensure that you are able
to provide the correct depth and detail in your answers.
• Make sure that you have mastered the objectives in
Learning Units 1 to 4.
Test 2
Test 2 will be based on • To prepare effectively for the assignment you can
learning units 5-7 include the following in your preparation:
The test will include both • Ensure that you work through all the revision questions
theory and application-type for all of the learning units.
questions. • Make sure that you have mastered the objectives in
You will be expected to Learning Units 5 to 7.
respond to short theory-
based questions, as well as
longer application type
questions.
Examination
The examination will assess • Make sure that you practise answering the sample
all learning units in this questions so that you become familiar with the kinds of
module and will include questions likely to appear in the examination itself.
both theory and
• Ensure that you work through all the activities,
application-type questions.
exercises and revision questions on Learn and in your
You will be expected to textbook. You must have completed close readings of
respond to short theory- your prescribed material to ensure that you have
based questions, as well as prepared adequately for your examination for this
longer application-type module.
questions.
• Pay close attention to the instruction words (like list,
apply, describe, analyse etc.) and to the mark

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IIE Learn Module Outline BUEL6212

allocations of each question to ensure that you provide

the correct depth and detail in your answers.
• Make sure that you are comfortable in responding to all
the objectives for all learning units.
• Brainstorm possible questions based on the learning
outcomes and objectives provided.

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Module Pacer
Code Programme Contact Sessions Credits
BUEL6212 BLW2,BML3 48 15
Learning Unit 1 Introduction to Business Enterprise Structures

Overview:

The purpose of this Learning Unit is to introduce the range of legal structures which are
suitable for the conduct of enterprise activities and the law associated therewith. Enterprises
come in different sizes and are intended to achieve a variety of different objects. It is not
therefore a case of “one size fits all” and, even after a structure has been selected, it may
not continue to be appropriate as the business evolves and circumstances change.

Please work through Theme 1 on Learn, together with the relevant sections of your
prescribed source/s. To ensure that you are working towards mastering the objectives for
this learning unit, please also ensure that you complete all activities on Learn.

Notwithstanding the fact that this Learning Unit is short it is of crucial importance that you
familiarise yourself with the contents hereof as this Learning Unit is the foundation for the
LUs to follow.

Tabulate the pros and cons of each business enterprise structure. Note the pros and cons of
each one as you progress through this module. By the end of the module you will have a
comprehensive schedule of the reasons for and against selecting a particular structure in
specific circumstances.

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Learning Unit 1: Introduction to Business Enterprise Structures

Sessions: Theme 1: Business Enterprises in South Prescribed Material (PM)
1-3 Africa
Related LO1: Differentiate between the various PM: Chapter 2
Outcomes: business enterprise structures
MO1 available in South Africa. Para 2.1, 2.5, 2.6, 2.7 and
MO2 LO2: Briefly differentiate between the 2.8 only.
MO3 various types of companies that are
MO4 allowed in terms of the Companies Mashingo & Schoeman
Act, 2008. Stokvels as an instrument
L03: Briefly differentiate between an and channel to extend
external company and a credit to poor households in
domesticated company. South Africa (2012) 5
LO4: Advise clients on the most Journal of Economic and
appropriate business enterprise Financial Sciences 49.
structure to use in deciding to Mashingo & Schoeman
establish a business. Stokvels as an instrument
LO5: Explain the meaning and role of and channel to extend
stokvels, how they are regulated, credit to poor households in
and generally how they operate South Africa (2012) 5
within the South African economy. Journal of Economic and
LO6: Apply all concepts to a set of facts Financial Sciences 49.

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Learning Unit 2 Partnerships

Overview:

Notwithstanding the fact that a partnership does not have separate legal personality,
partnerships are still used as a business entity for a variety of reasons. At times business
needs dictate the use of a business structure that is easy to form but is also easy to
terminate. It is therefore not uncommon for businesses to form a partnership with a view of
tendering for a contract, based on a joint venture (JV), with a view of formalising the business
enterprise should the tender be awarded by, for example, incorporating a company.

Although JVs and partnerships are fairly similar in nature the main difference is that a JV is
usually aimed at a short-term business relationship whereas a partnership envisages a longer
business relationship. 1

Please work through Themes 1, 2 and 3 on Learn, together with the relevant sections of your
prescribed source/s. To ensure that you are working towards mastering the objectives for
this learning unit, please complete all the activities on Learn.

Your ability to identify the essentialia of a partnership is sometimes tested through a set of
facts where the parties have not entered into a written partnership agreement. You should
be able to discern, from the conduct of the parties, whether or not a partnership came into
being.

1 http://legal-dictionary.thefreedictionary.com/Joint+Venture (accessed 16 November 2017).

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Learning Unit 2: Partnerships

Sessions: Theme 1: Basic requirements for a valid Prescribed Material (PM)
4-8 partnership
Related LO1: Apply all concepts relating to PM: Chapter 17
Outcomes: partnerships to a set of facts.
MO1 LO2: Explain the essentials (essentialia) of Para 17.1, 17.4, and 17.5
MO2 a partnership and apply these to a only.
MO3 set of facts.
MO4 LO3: Evaluate the legal nature of Pezzutto v Dreyer 1992 (3)
partnerships with reference to the SA 379 (A)
entity and aggregate theories.
LO4: Explain the operation of the
exception to legal personality as it
relates to insolvency law.
LO5: Explain the operation of the
exception to legal personality as it
relates to litigation by or against a
partnership.
Theme 2: Type of partnerships PM: Chapter 17

LO6: Differentiate between the various Para 17.3 only.

types of partnerships.
LO7: Fully explain the concept of a Ponelat v Schrepfer 2012 (1)
partnership universorum bonorum SA 206 (SCA); [2010]
and apply to set of facts. ZAWCHC 196

Butters v Mncora 2012 (4)

SA 1 (SCA)

Booysen v Stander [2018] 3

All SA 466 (WCC)
Theme 3: Relationship between the PM: Chapter 17
partners
LO8: Evaluate the relationship between Para 17.6 – 17.10
the partners inter se with specific
reference to the value of uberrimae De Jager v Olifants Tin ‘B”
fidei; the duties that it entails and Syndicate 1912 AD 505
apply with reference to case law to
a set of facts.

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LO9: Explain the authority of partners to

contract with third parties.
LO10: Evaluate the authority of partners
to bind the partnership.
LO11: Discuss the personal liability of
partners.
LO12: Discuss the circumstances under
which a partnership is dissolved and
the consequences thereof.

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Learning Unit 3 Close Corporations

Overview:

Close Corporations Act 69 of 1984 (CC Act) enabled business owners to incorporate a close
corporation 2 as opposed to a company as it was easier to register a close corporation than
a company. In addition, close corporations were seen as an ideal business entity for the small
business person’s needs as the running thereof is, although regulated by the CC Act, far less
onerous than that of a company.

The Companies Act 71 of 2008 (Companies Act) prevents the further registration of close
corporations. However, close corporations that had been registered prior to 1 May 2008
continue to exist. The Companies Act brought about a number of changes to the CC Act to
align companies and close corporations as business entities where it was deemed prudent
to do so.

Please work through Themes 1, 2 and 3 on Learn, together with the relevant sections of your
prescribed source/s. To ensure that you are working towards mastering the objectives for
this learning unit, please complete all the activities on Learn.

Notwithstanding the fact that legislation forbids the registration of new close corporations,
legal practitioners must still be familiar with the law as it applies to these entities while they
remain part of the South African business landscape.

2 Close corporation and corporation are used interchangeably in this Learning Unit unless the context

clearly indicates otherwise.

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Learning Unit 3: Close Corporations

Sessions: Theme 1: The Nature of Close Prescribed Material (PM)
9 - 13 Corporations
Related LO1: Apply all concepts relating to close PM: Chapter 2 para 2.6 only
Outcomes: corporations. Chapter 16 para 16.1 and
MO1 LO2: Discuss the nature and intended 16.2.
MO2 purpose for close corporations.
MO3 LO3: Advise on the relationship between
MO4 close corporations and the
Companies Act 2008 with reference
to a set of facts.
Theme 2: Membership Close PM: Chapter 16 para 16.3,
Corporations 16.4, 16.5, 16.6, 16.8, 16.9,
LO4: Explain the acquisition and disposal 16.11, 16.13
of members’ interest.
LO5: Explain the members’ duties J & K Timbers (Pty) Ltd t/a
towards the close corporation Tegs Timbers v GL & S
LO6: Evaluate the relationship of Furniture CC 2005 (3) SA
members inter se and the 223 (N)
relationship with third parties
LO7: Advise on the personal liability of Livanos v Oates [2012]
members for the corporation’s ZAGPJHC 30
debts with reference to the Act and
case law
LO8: Advise on the prohibition of loans to
and security on behalf of members
with reference to Close Corporations
Act
LO9: Advise on cessation of membership
via court order with reference to the
Close Corporations Act
Theme 3: Regulation of the Close PM: Chapter 16 para 16.7
Corporation and 16.8 only.
LO10: Discuss the law relating to
acquisition of members’ interest by
the CC
LO11: Explain the law relating to financial
assistance by the CC

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LO12: Apply the requirements of the

liquidity and solvency test to a set of
facts.
LO13: Explain under which circumstances
may payments be made by the
corporation to members.
LO14: Advise on the content of an
association agreement in terms of
the Close Corporations Act.

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Learning Unit 4 Business Trusts

Overview:

Despite the fact that a trust does not have separate legal personality there are a number of
advantages of creating a trust. One of these is that the trustees can as a general rule not be
held liable in personam for the liabilities of the trust.

There are three parties to a trust –

(a) the founder (donor), who donates assets to the trust;
(b) the trustees, who manage the trust; and
(c) the beneficiaries of the trust.

Please work through Theme 1 on Learn, together with the relevant sections of your
prescribed source/s. To ensure that you are working towards mastering the objectives for
this learning unit, please complete all the activities on Learn.

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Learning Unit 4: Business trusts

Sessions: Theme 1 Introduction to trusts Prescribed Material (PM)
14 - 16
Related LO1: Differentiate between the various PM: Chapter 18
Outcomes: types of trusts and the methods in
MO001 which they may be created. Para 18.1, 18.4, 18.5, 18.6,
MO002 LO2: Discuss the formation and the legal 18.7, 18.8, 18.9, 18.10,
MO003 nature of a trust. 18.12, 18.13.
MO004 LO3: Apply the rights and duties of the
respective parties to a trust to a set Trust Property Control Act
of facts. 57 of 1988
LO4 Advise on the advantages and
disadvantages of a business trust Braun v Blann and Botha
with reference to a set of facts. NNO 1984 (2) SA 850 (A)

Crookes NO v Watson 1956

(1) SA 277 (A)
Land and Agricultural Bank
of South Africa v Parker and
Others 2005 (2) SA 77 (SCA)

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Learning Unit 5 Legal Personality and the Companies Act 71 of 2008

Overview:

One of the main advantages of incorporating a company is that a company has legal
personality separate from its shareholders, in the case of profit companies separate legal
personality from its members, if it has members.

At times, however, either the court or the legislature “pierces” the corporate veil – i.e.
disregarding the separate legal personality of the juristic person.

This Learning Unit also introduces you to the Companies Act 71 of 2008 (the Act), the various
types of companies that may be registered under the Act, the constituent documents of a
company, and the like.

The 2008 Act has provided for different types of companies. You need to understand the
salient features of these companies, their similarities and differences. You also need to
understand the registration process for the different companies.

Please work through Themes 1, 2 and 3 on Learn, together with the relevant sections of your
prescribed source/s. To ensure that you are working towards mastering the objectives for
this learning unit, please complete all the activities on Learn.

Distinguish between the previous common law position and what the current legal position
is in terms of the Companies Act 2008

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Learning Unit 5: Legal Personality and the Companies Act

Sessions: Theme 1: Separate juristic personality of Prescribed Material (PM)
17 - 23 a company
Related LO1: Advise on the legal personality of PM: Chapter 2 para 2.2 to
Outcomes: juristic persons with reference to 2.4
MO1 case law and the Companies Act, Salomon v Salomon & Co
MO2 2008. Ltd [1897] AC 22 (HL)
MO3
MO4 Dadoo Ltd v Krugersdorp
Municipal Council 1920 AD
530
Theme 2: The Companies Act and the Prescribed Material (PM)
Common Law
LO2: Advise, with reference to case law, PM: Chapter 1 para 1.9 only
and the Act, the interaction between
the common law and the Companies
Act in terms of:
• Gaps in the Companies Act and
• Interpretation of the
Companies Act

Theme 3: Piercing the corporate veil Prescribed Material (PM)

LO3: Explain the concept of piercing the PM: Chapter 2 para 2.4
corporate veil: only.
• in terms of the common law; Chapter 14 para 14.4 only.
• its adoption and adaptation in
terms of the Companies Act; Arden, Piercing the
and corporate veil – old
• apply the concept to a set of metaphor, modern
facts practice? 2017 (1) JCCL&P
L04: Advise on the liability of directors 1.
and shareholders in terms of section
20(9) of the Companies. Airport Cold Storage (Pty)
Ltd v Ebrahim 2008 (2) SA
303 (C)

Cape Pacific Ltd v Lubner

Controlling Investments
(Pty) Ltd 1995 (4) SA 790 (A)

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Hülse-Reutter v Gödde 2001

(4) SA 1336 (SCA)
Theme 4: Capacity
LO5: Assess the impact of the Companies PM: Chapter 2 para 2.12
Act, 2008 on the ultra vires doctrine; only.
doctrine of constructive notice; and
the Turquand Rule. Royal British Bank v
Turquand (1856) 6 E&B 327

One Stop Financial Services

(Pty) Ltd v Neffensaan
Ontwikkelings (Pty) Ltd and
Another (20028/14) [2015]
ZAWCHC 89

Theme 5: Company Formation PM: Chapter 2 para 2.9 and

LO6: Differentiate between the various 2.10 only.
types of companies.
LO7: Advise on the incorporation process Cuninghame and another v
with reference to the Companies First Ready Development
Act, 2008. 249 (association
LO8: Distinguish between incorporation incorporated in terms of
and registration. section 21) 2010 (1) All SA
LO9: Discuss the memorandum of 473 (SCA).
incorporation (MOI) in terms of.
• Content
• Legal status
• Flexibility
• Unalterable, alterable and
default provisions; and
• Amendment
L010: Apply the law as it relates to pre-
incorporation contracts to a set of
facts, including:
• define a pre-incorporation
contract; and
• Advise on the legal
consequences of entering into a
pre-incorporation contract.

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Learning Unit 6 Groups of companies

Overview:

Because of the nature of business, conglomerates and groups of companies have developed
over time. They do not have separate legal personality, but they are recognised in law and
practice.

Please note:
paragraph 3.3 item five, the solvency and liquidity test no longer applies with a group
context, but it also applies to the context of related and interrelated companies. This is dealt
with later in this module.

paragraph 3.3 item 6 is incorrect. Financial assistance does not only apply within a group
context, but it also applies to the context of related and interrelated companies. This is deal
with later in this module.

Please work through Themes 1, 2 and 3 on Learn, together with the relevant sections of your
prescribed source/s. To ensure that you are working towards mastering the objectives for
this learning unit, please complete all the activities on Learn.

Select one of the larger groups of companies whose shares are listed on the JSE Ltd and
whose Annual Report is published online. Review the group structure as explained by them
and identify at least one holding company and three subsidiary companies. If evident from
the Annual Report, identify one instance where a company “controls” another.

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Learning Unit 6: Groups of Companies

Sessions: Theme 1: Definitions Prescribed Material (PM)
24 - 26
Related LO1: Explain all relevant terminology PM: Chapter 3 Para 3.1, 3.2
Outcomes: relating to groups of companies in & 3.4.
MO1 terms of the Companies Act 2008.
MO2 LO2: Discuss the meaning of control with
MO3 reference to section 2 of the
Companies Act, 2008.
Theme 2: Voting rights PM: Chapter 3 para 3.4.2
LO3: Explain how general voting rights only
are determined.
Theme 3: Legal consequences for groups PM: Chapter 3 para 3.5 and
of companies 3.6 only.
LO4: Discuss in detail the six key
consequences as provided for in
the Companies Act 2008.
LO5: Explain when consolidated financial
statements are required.

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Learning Unit 7 Corporate finance: Equity, Debt Instruments and Distributions

Overview:

Companies fund their activities either by the issue of securities (usually shares) or by
borrowing (so-called debt). In other words, funds are made available to the company either
by investment in securities or by loans made to the company.

Please work through Themes 1, 2 and 3 on Learn, together with the relevant sections of your
prescribed source/s. To ensure that you are working towards mastering the objectives for
this learning unit, please complete all the activities on Learn.

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Learning Unit 7: Corporate finance: Equity, Debt Instruments and Distributions

Sessions:27 - 30 Theme 1: Introduction to corporate Prescribed Material (PM)
financing
Related LO1: Apply the concepts of debt and PM: Chapter 4 Para 4.1, 4.5
Outcomes: equity as ways of funding a
MO1 company’s activities to a set of facts.
MO2 LO2: Describe the legal nature of a share
MO3 and a debt instrument.
MO4 Theme 2: Sources of Financing, nature of PM: Chapter 4 Para 4.3 –
assets and the solvency and liquidity test 4.8.
LO3: Discuss the rights attached to
shares. Basson v on-Point Engineers
LO4: Differentiate between – (Pty) Ltd 2012 JDR 2126
o authorised, issued and (GNP); [2012] ZAGPPHC 251
unissued shares
o the main classes of shares; La Luca Sands Share Block v
o the rights of shareholders and Barkhan 2010 (6) SA 421
that of debenture holders; (SCA); [2010] ZASCA 132
o certificated and uncertificated
securities;
o the issue of shares and the
transfer of shares;
o the beneficial owner of shares
and the nominee or registered
holder.
LO5: Compare the solvency and liquidity
test with the capital maintenance.
LO6: Explain how shares are issued.
Theme 3: Distribution PM: Chapter 4 para 4.7.6
and 4.9 only.
LO7: Explain the meaning and
requirements of a –
o distribution; and
o share buyback/ repurchases.
LO8: Discuss the requirements for a
company wanting to offer financial
assistance to people for the
acquisition of shares.

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Learning Unit 8 Shareholders and Company Meetings

Overview:

In Learning Unit 1 you learnt that a company is a juristic person and has separate legal
personality. However, as it is not a “natural person” but an “artificial (juristic) person” it
cannot take any actions on its own but must rely on people. To this end, a company has two
organs to take decisions on its behalf, viz. the general meeting (i.e. shareholders’ meetings)
and the board of directors.

Fig. 8.1 sets out these organs, indicating their main function and makes reference to the fact
that usually companies have employees other than shareholders and/or directors of the
company.

Company

Owners Managements
(shareholders) (directors)

Workers
(employees)

In a large public company, there may be many shareholders who have no connection with
each other. It is not therefore feasible for them to agree on actions that need to be taken.
This has led to the development of shareholders acting as a body by way of decisions made
at a meeting. This Learning Unit deals with the actions that may be taken by shareholders
and matters relating to shareholders’ meetings, known as “general meetings”.

Please work through Themes 1 and 2 on Learn, together with the relevant sections of your
prescribed source/s. To ensure that you are working towards mastering the objectives for
this learning unit, please complete all the activities on Learn.

Familiarise yourself with the contents of sections 57 to 78 of the Companies Act and the
Memorandum of Agreement as two sources of ‘rules’ for determining who may act in
respect of a particular matter.

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Learning Unit 8: Shareholders and Company Meetings

Sessions: Theme 1: Shareholder meetings Prescribed Material (PM)
31 - 33
Related LO1: Explain all terminology relating to PM: Chapter 5 Para 5.3 -
Outcomes: meetings, including: 5.9, 5.12 and 5.15
MO001 • Quorum; and
MO002 • Proxy; and
MO003 • Record date
MO004 LO2: Explain who may call a
shareholder’s meeting and under
what circumstances.
LO3: Discuss the formality requirements
for calling convening, conducting,
postponing and adjourning
shareholder meetings and apply to
a set of facts.
LO4: Discuss how and when shareholders
can act other than at meetings.
LO5: Differentiate between ordinary and
special resolutions.
LO6: Explain when a special resolution is
required.
Theme 2: Annual General Meetings
PM: Chapter 5 para 5.13
LO7: Explain the time frames for calling only.
meetings in a public company.
LO8: Discuss the matters that must be
dealt with at an AGM.

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Learning Unit 9 Directors, Committees and Company Officers

Overview:

Although the general meeting is an important organ of a company, especially since it must
approve a number of important decisions as provided or in the Act, the board of directors
plays a bigger role in the management of the company.

Please work through Theme 1 on Learn, together with the relevant sections of your
prescribed source/s. To ensure that you are working towards mastering the objectives for
this learning unit, please complete all the activities on Learn.

Familiarise yourself with the contents of tables 6.3 to 6.6

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Learning Unit : 9 Directors, Committees and Company Officers

Sessions: Theme 1: Appointment of Directors Prescribed Material (PM)
34 - 38 and Board Committees
LO1: Briefly differentiate between the PM: Chapter 6
various types of directors and PPWAWU National Provident
board committees. Fund v Chemical, Engineering,
LO2: Explain the requirement for the Paper, Wood and Allied
prescribed minimum number of Workers’ Union 2008 (2) SA
directors in relation to the 351 (W) as set out in textbook.
different types of company. R v Kritzinger 1971 (2) SA 57
LO3: Explain which of the provisions in (A) as set out in textbook.
the Companies Act concerning Case studies in this chapter:
directors may be varied in a Dorbyl Ltd v Vorster 2011 (5)
company’s MOI. SA 575 (GSJ)
Fisheries Development
Corporation of SA Ltd v
Jorgensen 1980 (4) SA 156 (W)
Kukama v Lobelo JDR 0663
(GSJ); [201] ZAGP JHC 60
MMA Architects v
LuyandaMpahlwa [2011]
ZAWCHC
Phillips v Fieldstone Africa (Pty)
Ltd [2004] 1 All SA 150 (A)
Robinson v Randfontein Estate
Gold Mining Co Ltd 1921 AD
168
Other cases:
I-Kiosk Internet and
Information (Pty) Ltd 2003 (3)
SA 806 (C)
Da Silva and others v CH
Chemicals (Pty) Ltd 2008 (6) SA
620 (SCA)
Ghirsi v Timber Developers
(Pty) Ltd 2007 (4) SA 536 (SCA)

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Related Theme 2: Role and Duties of Directors Prescribed Material (PM)

Outcomes: LO4: Differentiate between directors PM: Chapter 6
MO1 and managers in relation to their
MO2 roles and responsibilities within SAICA Mandatory Audit Firm
MO3 the company Rotation” Discussion Paper:
MO4 LO5: Fully explain the duties of Considering Mandatory Audit
Directors and what these duties Firm Rotation (MAFR) (and
consist of. other Related Measures) as
Possible Means of Enhancing
Auditor Independence,
available at
http://www.saica.co.za/Portals
/0/documents/MAFRDiscussio
nPaper.pdf?Reference_ID=450
18384 (accessed 16 November
2017)

Theme 3: Liabilities of Directors Prescribed Material (PM)

L06: Explain the personal liability of PM: Chapter 6
Directors.
LO7: Explain the potential liability of
Directors with reference to the
application of the business
judgement rule.
Theme 4: Ineligibility and Prescribed Material (PM)
disqualification of Directors
LO8: Distinguish between the PM: Chapters 6 and 14
ineligibility and disqualification
of certain persons for the
purposes of being appointed as
directors of a company;
LO9: Explain the process to
declare a director delinquent or
to place her/him under probation
and the filling of a vacancy on the
board.

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Theme 5: Audit, Independent Review Prescribed Material (PM)

& Auditors
LO10: Differentiate between an audit PM: Chapters 5, 6 and 13
and an independent review.
LO11: Explain which company’s
financial statements are subject
to an audit.
L012: Briefly explain the duties of the
audit committee.
LO13: Discuss the requirements for
appointment, resignation and
removal of the auditor.
Theme 6: Company Secretary PM: Chapters 6 and 13
LO14: Explain which Companies must
appoint a company secretary;
LO15: Discuss the duties of the
company secretary.
LO16: Explain under which
circumstances a person would
be disqualified from
appointment as a company
secretary.

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Learning Unit 10 Public offers of securities

Overview:

One of the ways in which a company acquires money in order to expand its business is to
offer securities to the public. As the potential for abuse exists the offering of securities to
the public is highly regulated by the Companies Act.

Please work through Themes 1 and 2 on Learn, together with the relevant sections of your
prescribed source/s. To ensure that you are working towards mastering the objectives for
this learning unit, please complete all the activities on Learn.

Student be able to define the prospectus and know the requirements with which it must
comply

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Learning Unit 10: Public offers of securities

Sessions: Theme 1: General restrictions on offers Prescribed Material (PM)
39 – 41 to the public
Related LO1: Differentiate between: PM: Chapter 9 para 9.3
Outcomes: • Primary offering of securities;
MO1 • Secondary offering of Gold Fields Ltd v Harmony
MO2 securities; Gold Mining Co Ltd 2005 (2)
MO3 • Initial public offer of securities. SA 506 (SCA)
MO4 LO2: Explain the meaning of offer to the
public.
LO3: Explain which actions will not
constitute offers to the public

Theme 2: The Prospectus PM: Chapter 9 para 9.5-9.6

LO4: Explain the meaning of prospectus

and the information it must contain,

LO5: Explain the requirements that must

be met when advertising offers of
securities to the public
LO6: Explain the procedure for
registration of a prospectus,
LO7: Explain the purpose of underwriting
statements contained in the
prospectus
LO8: When offering securities to the
public, explain when a prospectus is
required and when it is not
LO9: discuss liability in the event of
untrue statements included in the
prospectus with regard to
o Who is liable
o How they become liable
o Extent of liability; and
o What must be proven

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Learning Unit 11 Takeovers, Offers and Fundamental Transactions

Overview:

It is common practice for organisations to restructure, merge with other entities and the
like. Not only do laws such as the Competition Act 89 of 1998 and the Labour Relations Act
66 of 1995 play an important role in such restructuring, mergers and the like but the
Companies Act also creates additional regulatory requirements in some instances. In
particular, if transactions are classified as fundamental transactions or affected transactions.

Please work through Themes 1, 2 and 3 on Learn, together with the relevant sections of your
prescribed source/s. To ensure that you are working towards mastering the objectives for
this learning unit, please complete all the activities on Learn.

Students must familiarise themselves with the various fundamental transactions and be able
to explain the transaction by way of example or diagram.

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Learning Unit 11: Takeovers, Offers and Fundamental Transactions

Sessions: Theme 1: Fundamental transactions Prescribed Material (PM)
42 - 43
Related LO1: Differentiate between the different PM: Chapter 10 Para 10.1,
Outcomes: types of fundamental transactions. 10.2
MO1 LO2: Explain the meanings of “affected
MO2 transaction” and “regulated
MO3 company”.
MO4 LO3: Explain the concept of a mandatory
offer as a type of affected
transaction and when a mandatory
offer is triggered.
LO4: Briefly explain the concept of a
“squeeze out” transaction as a type
of affected transaction.
Theme 2: Regulation of fundamental PM: Chapter 10 para 10.3,
transactions 10.5
S112-116 of the Companies
LO5: Explain the role and function of the Act, 2008
Takeover Regulation Panel in
affected transactions.
Theme 3: Remedies PM: Chapters 10 and 14
LO6: Fully explain the appraisal remedy para 10.4
and the procedural steps that a
shareholder must follow to S164 of the Companies Act,
successfully rely on this remedy. 2008

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Learning Unit 12 Business rescue, compromise, winding-up and deregistration

Overview:

For a variety of reasons businesses close down – often as a result of financial reasons.

This Learning Unit will look at business rescue 3 as a method introduced by the Act to turn a
financially distressed company around. If the business rescue process is unsuccessful it may
lead to the liquidation of the company. As liquidation was covered in the Law of Insolvency
we shall just briefly touch on liquidation (winding-up) in this Learning Unit.

Please work through Themes 1, 2 and 3 on Learn, together with the relevant sections of your
prescribed source/s. To ensure that you are working towards mastering the objectives for
this learning unit, please complete all the activities on Learn.

Students need to compare the requirements and process of business rescue, compromise and
liquidation in terms of who may initiate the process, the rights and duties of the directors
during the process, the role of creditors during the process and who oversees the process.

3 Business rescue replaces judicial management as a way in which to try and transform a struggling

business to a thriving business again.

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Learning Unit 12: Business rescue, compromise, winding-up and deregistration

Sessions: Theme 1: Business rescue Prescribed Material (PM)
44 - 46
Related LO1: Explain the initiation and process of PM: Chapter 12
Outcomes: Business Rescue entails with
MO1 reference to the definition in section
MO2 128 of the Companies Act;
MO3 LO2: Explain the meaning of –
MO4 o financially distressed;
o affected persons
LO3: Discuss the role of the business
rescue practitioner.
LO4: Advise on the legal consequences of
business rescue proceedings with
reference to a set of facts.
Theme 2: Compromise PM: Chapter 12
LO5: Discuss the meaning and purpose
of compromise.
LO6: Compare the process of comprise as
it existed before and after the
Companies Act, 2008.
LO7: Discuss the information that a
proposal for compromise must
contain.
LO8: Briefly outline the requirements for
a compromise.
Theme 3: Winding up PM: Chapter 15
LO9: Broadly differentiate between
winding-up and deregistration of
companies.

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Learning Unit 13 Remedies and Enforcement

Overview:

This Learning Unit will explore remedies available to, inter alia, shareholders and how the
Companies Act is enforced.

Please note that paragraphs 14.2.1; 14.3.2 and 14.4 have been prescribed in prior learning
units.

Please work through Themes 1 and 2 on Learn, together with the relevant sections of your
prescribed source/s. To ensure that you are working towards mastering the objectives for
this learning unit, please complete all the activities on Learn.

Various agencies play a role in the enforcement of remedies. Students need to be able to
describe the agencies and describe their role.

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Learning Unit 13: Remedies and Enforcement

Sessions: Theme 1 Remedies Prescribed Material (PM)
–47 - 48
Related LO1: Discuss the use and application of PM: Chapter 14
Outcomes: the statutory derivative action.
MO1 LO2: Explain which remedy is available to
MO2 directors and shareholders in the
MO3 event of prejudicial or oppressive
MO4 conduct.
LO3: Explain how the holders of issued
securities may further protect their
rights by means of an application for
a declaratory order.
Theme 2: Enforcement and dispute PM: Chapter 14
resolution
LO4: Explain how the provisions of the
Act are enforced.
LO5: Discuss the mechanisms available to
an aggrieved party.
LO6: Advise on the three forms of
alternative dispute resolution with
reference to the s166 of the
Companies Act.

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