Week 4 Concept of a Company
Week 4 Concept of a Company
2 types of persons:
1. Natural persons (human beings)
2. Juristic persons (eg co or CC) = Legal subject/person ie an artificial person, which
stands apart from the people who are members of it.
o Juristic persons is something that is capable of bearing rights & duties in its own right
– BUT they do not have all rights as humans
o Only rights necessary to pursue economic activity
ACQUISITION OF LEGAL PERSONALITY
1
20 000 shares of £1 each
A cash amount
Debentures to value of £10 000 – secured by a bond over assets
Co went insolvent
Assets weren’t enough even to cover secured debentures in full
S was a secured cr & therefore ordinary cr’s received nothing
Unsecured cr’s argued that S and his co were in essence the same person & that
S should actually be liable for debts of co (& not be a secured cr)
Held: from its inception, co is separate from its members (S not liable for debts)
2
DISREGARDING SEPARATE EXISTENCE OF CORPORATE ENTITY
Company has no physical mind or body so it must operate through human organs, being
the Directors & Shareholders
Question: Has company acted through its human organs, or has human in guise of
organ of company acted, not for the company, but in a self-serving human capacity?
But – some argue this is in direct conflict with Dadoo & should not be followed in South
Africa
Cattle Breeders Farm (Pvt) Ltd v Veldman 1974 (1) SA 169 RAD
Controlling shareholder in a company used the company, as owner of the
residence in which he & his wife had been living, to evict her.
3
The law did not permit him to evict her in his personal capacity without providing
alternative accommodation.
Company had no interest in evicting wife, only the controlling shareholder.
Erasmus v Pentamed