Company Law Manual

Faculty Faculty of Business and Accounting
Module Name Company Law

Module Code A6-COL-17
Semester
Critical Reviewers
Unit Contributors
Emmanuel Ndhlovu Unit Contributors DL Document Reviewers
Table of content
Page
Company Law cover page............................................................................................................................0

Unit 1...........................................................................................................................................................2
Legal personality and piercing of corporate veil..........................................................................................2
Unit 2.........................................................................................................................................................12
History and administration of company law in Botswana.........................................................................12
Unit 3.........................................................................................................................................................18
Types of companies...................................................................................................................................18
Unit 4.........................................................................................................................................................24
Incorparation of companies and constitutions..........................................................................................24
Unit 5........................................................................................................................................................31
Shares and share capital..........................................................................................................................31
Unit 6.........................................................................................................................................................39
Listing and Prospectus...............................................................................................................................39
Unit 7.........................................................................................................................................................47
Administration of companies: Meetings....................................................................................................47
Unit 8.........................................................................................................................................................56
Administration of companies: Majority and Minority rule........................................................................56
Unit 9.........................................................................................................................................................63
Management of companies.......................................................................................................................63
Unit 10.......................................................................................................................................................71
Winding-up of company operations..........................................................................................................71
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Unit 1
Legal personality and piercing of corporate veil

Learning Outcomes
On successful completion of the unit you should be able to:
 Examine the cases where the court has lifted the corporate veil. Is there any principle
which ties these cases together?
 Consider the effect of the rule in Salomon v Salomon in commercial life and its
advantages and disadvantages.
 Compare a company with (a) partnership and (b) an unincorporated association.
 Consider the cases on the criminal liability of a company. When will a company be held
criminally liable, in particular the types of offences it will be capable of committing.
Examination Context
In an examination you may be required to:
(i) Expalin what is legal personality
(ii) Illustrate the key implications of legal personality especially in relation to liability
(iii) Identify instances in which the legal personality of a company will be disregarded and
responsible persons within the company will be held personally liable?
(iv) Discuss either the common law principles pertaining to piercing the corporate veil, or
the statutory principle of disregarding the separate legal existence, or both.
Prescribed Material for this Unit

1. Chapters 1 Dignam, A. and J. Lowry Company Law. (Oxford: Oxford University Press
2006) fourth edition [ISBN 0199289363].
2. Chapter 1: Kapoor N.D. 2011. Elements of company law.
3. Companies Act: section 20(9) o Close Corporations Act: section 65
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1.0 Definition and concept Company Law
Company law (known as Corporate Law in some countries) is about the formation of
companies, their continuing regulation during their life and the procedures for dealing with
their assets when they are terminated in a liquidation. The state as such plays a major role in
company law through Companies Act and other forms of legislation. However, self-regulation,
as we will see, also plays a significant part in the regulation of larger companies through
corporate governance.
2. Nature of company
A company, in common parlance, means a voluntary group of persons associated together for
the attainment of a common end, social or economic. It includes different kinds of associations,
both business and and otherwise. However, in relation to legislation, a company is an entity
registered under the Companies Act ( new or old). When a company is registered, it becomes
an artificial person existing only in the contemplation of law.
In Ngcwase v Terblanche at 803 H, it was held that a corporation is a statutory juristic person
(persona juris) considered to be an abstract legal entity which exists as a juristic reality in the
contemplation of law despite the fact that it lacks physical existence.
2.1 Characteristics of a company
The most important characteristics of a company are legal personality and limited liability of its
members and will be briefly discussed below. Other features include perpetual succession,
common seal and transferability of shares.
2.2 Limited liability
This means that shareholders are not personally responsible for business debts and obligations
of the corporation. In other words, if the corporation is sued, only the assets of the business are
at risk, not the shareholders personal assets, such as their houses or cars. The liability of all the
members of a limited company is limited to the nominal amount of its share value therein
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(Jenkin v Pharmaceutical Society of Great Britain, (1921).392). Limited liability stand out to be
the greatest advantage of incorporation.
2.3 Legal personality and its implications (ss 24)
A company is a separate legal personality and a veil of incorporation is drawn between the
persons dealing with a company and its members. Legal personality also known as “juristic
personality” means to be acknowledged in law as a person or bearer of its own rights, with
liability for its own debts, entering into contracts, owning property and ability to sue and be
sued.
Separate Legal Personality and Limited liability was established by the Limited Liability Act 1855
in England and was significantly extended by the case of Salomon v A Salomon & Co Ltd [1897]
AC 22 (HL). This case is the most important case in company law and must be understood (The
full case will be on the Blackboard). This case was significant because it extended the principle
of separate legal personality to essentially ‘one-man’ companies.
In Salomon v Salomon & Co Ltd, the principle of separate legal personality were sated as
follows:
 The estate of the company is assessed apart from the estates of the individual
shareholders or members.
 The debts of the company are the company’s debts and are separate from those of its
shareholders or members and at the same time, the profits of the company belong to
the company and not to its shareholders, and, only after the company has declared a
dividend, may the shareholders claim that dividend.
 The assets of the company are its exclusive property. The shareholders have no
proportionate, proprietary rights therein. Courts acknowledge the importance of
distinguishing between companies and their shareholders.
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 Where a company is wronged, the company must itself seek redress as recently
confirmed in Ahmadiyya Ishaati-Islam Lahore (South Africa) v Muslim Judicial Council
(Cape) 1983 (4) SA 855 (C).
The consequence of incorporation is that a ‘veil of incorporation’ is created. Veil of

incorporation is a legal concept that separates the personality of a corporation from the
personalities of its shareholders, and protects them from being personally liable for the
company's debts and other obligations. The concept of the corporate veil is that, from a legal
and accounting perspective, a corporation is actually a separate entity.
2.3.1 Legal personality of branches and divisions
A modern company usually operates through various divisions which, although having a single
controlling mind or board, might in some cases even compete with one another. Questions of
their separate legal personality might legitimately be raised. However, if such branches and
divisions are not registered entities themselves, but merely operate separately for practical
purposes, they do not for purposes of law have their own separate legal personality. The
branches or divisions of a company are part of the company itself and do not have their own
separate legal existence (ABSA Bank Ltd v Blignaut).
3. Lifting of corporate veil
The doctrine of separate legal personality, regarded as a cornerstone of company law, create a
metaphorical ‘veil’ between the company and its members. Effects of separate legal personality
in Salomon, means that courts are bound not to ‘lift the veil’ of incorporation and this worked
to the advantage of the person who effectively owned the business, to abuse blatantly by
engaging in a sham, fraud or improper conduct. This necessitates the courts to piece or lift the
corporate veil. A decision established in Dadoo Ltd and others v Krugersdorp Municipal Council
at 550 - 5511, which held as follows:
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This conception of the existence of a company as a separate entity distinct from its
shareholders is no merely artificial and technical thing. It is a matter of substance; cases
may arise concerning the existence or attributes which in the nature of things cannot be
associated with a purely legal persona. And then it may be necessary to look behind the
company and pay regard to the personality of the shareholders, who compose it.
Lifting or piercing the corporate veil is a common law process used to ignore a company’s
separate legal personality in order to hold persons inside the company personally liable. The
piercing of the corporate veil means disregarding the dichotomy between the company and the
natural person behind it and attributing liability to that person where he has misused or abused
of corporate personality. This ‘veil’ can be lifted in two ways: either in terms of the common
law principle that has been developed in the case law (piercing the corporate veil) or by means
of the statutory provisions.
3.1 Lifting of corporate veil through courts or common law
The following cases demonstrate the varying circumstances in which a corporate veil can be
lifted by the courts or common law provided the intention to lift the veil is ‘expressed in clear
unequivocal language’.
 Tax evasion: Apthorpe v Peter Schoenhofen Brewing Co Ltd (1899), 41.
 Prevention of fraud or improper conduct: Jones v Lipman (1962), 442,
 Protecting public policy: In Die Dros (Pty) Ltd and another v Telefon Beverages CC, which
held that, where fraud, dishonesty and other improper conduct are present, the need to
preserve the separate legal personality of a company must be balanced against policy
considerations favouring piercing the corporate veil.
 Fraud/sham or facade: Gilford Motor Co v Horne [1933] Ch 935 (CA).
 Company acting as an agent or trustee of shareholders: Smith Stone & Knight Ltd v
Birmingham DC [1939] 4.
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 Single Economic Entity within Corporate Structures: Adams v Cape Industries Plc [1990]
Ch 433 (CA) – this is the leading case in this area and must be read and understood
The common law principle of lifting or piercing the corporate veil is used by the courts to place
limitations on the principle of separate legal personality in order to avoid abuse. Courts have
made it clear that they will not allow the use of any legal entity to justify wrongs, to conceal
fraud, or to defend or hide crime. In such cases, the courts may pierce or lift the corporate veil
and hold directors and others personally liable for acts committed in the name of the company.
However, to preserve the integrity of the principle of legal personality, the courts have said that
they will only pierce or lift the corporate veil in exceptional circumstances where there is no
alternative remedy available and where piercing the corporate veil will prevent an injustice. The
courts are reluctant to lift the corporate veil, as this ignores the concept of separate legal
personality and the consequences attached thereto. The court does not have a general
discretion to disregard a company’s separate existence.
3.2 Lifting by statutes
The Companies Act provides conditions under which the veil may be lifted and include;
 ss 160: Wrongful trading
 ss 481: Fraudulent trading
 ss 502: Where a director is prohibited or disqualified to manage the company
3.3 A test to lift or upheld corporate veil principle
A factual investigation must be conducted in each case to decide whether it would be

appropriate to lift the corporate veil. In Botha v Van Niekerk & another, a test to determine
when the corporate veil should be disregarded, was formulated. In this judgment, it was held
that only if an “unconscionable injustice” would result should the court lift the corporate veil.
Or if there was evidence of misuse or abuse of the distinction between the company and those
who control it, and this has enabled those who control the company to gain an unfair
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advantage (a dual test was introduced by adding the element of unfair advantage). The court
further confirmed that much depended on a close analysis of the facts of each case and
considerations of policy.
4.0 Other forms of business in Botswana
Prior to the introduction of the new Companies Act 2003 on 3rd July 2007, companies in
Botswana were formed under the Companies Act CAP 42:01 as amended, which provided for a
normal range of business formats:
 Partnership
 Common law trust
 Sole proprietorship
 Societies, being associations of persons
Sole-traders are often hawkers or small traders or professionals such as doctors, engineers and
accountants practising on their own. Partnerships are normally audit firms and joint ventures
between two or three companies. It is rare to find a partnership firm carrying out business in
Botswana. Close Corporation is a new type of entity which does not have directors or
shareholders but only members who will however have limited liability like a proprietary or
public limited company. Close Corporations are however not popular. Cooperative Societies
conduct business in Botswana but they are not popular. There are family trusts and public
trusts carrying out business in Botswana but such forms are not popular, either.
When it comes to non-profit entities, Trusts are the most common entities. Trusts own mostly
schools, places of worship, colleges and vocational centres. Companies are also formed to carry
out non-profit activities and they are exempted to keep "Limited" as part of their name. Private
individuals and association of persons often form companies to carry out non-profit activities
particularly when they seek donor funds. Cooperative Societies in Botswana carry out Savings
and micro-lending operations in the form Employee Associations.
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Example
Explain what is meant by the veil of incorporation of a company and when can it be lifted by the
courts.
Solution
(a) The veil of incorporation of a company: The principle of separate corporate personality
is a cornerstone of the company law. Salomon v Salomon & Co Ltd (1897) cast a veil
between a company and its members. Most of the time the veil is opaque through
which one cannot see who the members are. But exceptionally, in some instances, both
the legislature and the court disregard the corporate personality and look to the
‘realities’ behind it with a view to impose liability on the shareholders, rather than the
company, usually in the interest of the public. This approach has come to be known as
‘lifting the veil’ of corporation. Whether and when the corporate veil should be lifted is a
decision that is taken exceptionally; to take it lightly or liberally may destroy in the most
fundamental way the very foundation on which the edifice of the company law stands.
The corporate veil does not conceal the internal affairs of the company from view. On
the contrary, the legislature has always made it an essential condition of the recognition
of corporate personality that it should be accompanied by the widest publicity. The third
parties may not have a recourse against its members but they are nevertheless entitled
to see who these members are, what shares they hold, who the directors are, what its
constitution is, what its capital is and how it has been obtained, and its profit and loss
account. What essentially the corporate veil does is to shield members from personal
liability for the debts of their company.
(b) It is not possible to formulate a general principle covering all cases where the courts
have disregarded the separate legal entity rule.
The following is a list of more important cases where the courts have disregarded the
rule:
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(i) In Daimler Co Ltd v Continental Tyre and Rubber Co (1916) it was held during the
First World War in England that the court was entitled to look at the nationality
of the members to decide whether the company was an enemy alien or not.
(ii) In Robinson v Randfontein Estates Gold Mining Co Ltd (1921) the court refused
to take into consideration the separate existence of a subsidiary where it was
sought to use the subsidiary as a device in evading a director’s fiduciary duties to
the holding company.
(iii) The veil can be lifted to prevent the deliberate evasion of a contractual
obligation: Gilford Motor Co v Horne (1933). Horne had covenanted in a written
agreement not to solicit customers of the company after leaving its employment.
After his employment was terminated, Horne set up a company and solicited the
plaintiff’s customers. The corporate veil was lifted and it was held that the
company was set up for the deliberate evasion of a contractual obligation and
that the device of a company could not be used for such a purpose.
(iv) The corporate veil may be disregarded when the company is used as a means to
perpetrate a fraud. In Cape Pacific Ltd v Lubner Controling Investment (Pty) Ltd
and others (1995) the court pointed out that where fraud, dishonesty or other
improper conduct is found to be present, the need to preserve the separate
corporate identity would, in such circumstances, have to be balanced against
policy considerations that arise in favour of piercing the corporate veil. In Gilford
Motor Co v Horne (1933), the court lifted the corporate veil of J M Horne & Co
Ltd because the purpose of the company was to enable Horne, under a cloak or
sham, to engage in business which Horne had covenanted in a written
agreement not to engage in after leaving his employment with Gilford Motor
Company.
(v) Corporate veil can be lifted and a company regarded an agent of its shareholders
or controllers, if it can be established as a matter of fact. It may be recalled that
in Salomon’s case, the court refused to regard Salomon & Co as an agent of the
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Salomon merely because he controlled a large number of shares. Courts do not
infer an agency from the mere fact of control; it has to be established as a matter
of fact. A company can be an agent of its controlling shareholder, as well as, of
anyone else, for instance, under an express agreement. In Re F G (Films) Ltd,
(1953) the company was incorporated in England with a capital of £100, divided
into 100 shares of £1 each. It made a film ‘Monsoon’ but the Board of Trade
refused to register it as a British film because the film had in reality been made
by a large American Company. The American company provided at least £80,000
for the making of the film. 90 out of 100 shares of the company were held by the
American director, who was also the president of the American company, and
the remaining ten were held by a British director. The British company employed
no staff. It was insignificant and its participation in the undertaking was
practically negligible. The British company, it was held, was merely the nominee
or agent of the American company, which brought it into existence for the sole
purpose of enabling the film to qualify as a British film by evading the legislation.
There was, thus, clear factual evidence that the British company was only an
agent of its controlling shareholder and it was because of that that the court
held so.
Learning Activity 1:
Before you continue to the next section attempt the following questions:
Question 1
To the extent that a company is properly authorised to act, what is the nature of the legal
capacity which it may exercise? Is it real,” or ‘‘fictitious”?
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Unit 2
History and administration of company law in Botswana

Learning Outcomes
 Outline the sources of Company Law in Botswana
 State the object of the Companies Act
Examination Context
(i) Identify the sources of company law in Botswana
(ii) Explain the object of the Companies Act of 2003
 Chapters 1: Quansah, E. K, Introduction to the Botswana legal system, Gaborone : E.

Quansah,1993.
 National Assembly of Botswana Hansard number 143, part 5,Nov-Dec 2003
 FHI Cassim `The companies Act 2008: An overview of a Few of its core Provisions’ (2010)
MERC LJ157@157
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1. Introduction
To fully understand the present company legislation in Botswana, a brief background of the
Country’s judicial history is worth some discussion. This is the subject matter of the unit.
2. Background of the Botswana’s legal system
Law in Botswana began in 1891 when a formal administration was established. The High
Commissioner was given power to legislate by proclamation in the Bechuanaland Protectorate.
The Cape Colony laws were first to applied mutatis mutandis. The common law in force in the
Cape of Good Hope (now South Africa) was the Roman-Dutch law as received from Holland and
developed by the Colony’s superior courts. This was then followed by the General Law
Proclamation no.39 of 1909. The General Law Proclamation 36 of 1909 provided application of
both common and statutory law in force at the Cape of Good Hope.
Therefore it can be concluded that Roman-Dutch law as influenced by English law, or the Cape
colony law as influenced by English law, is the common law of Botswana. This common law is
subsisting side by side with the legislation, judicial decisions and customary law (only applied to
tribesmen) as a source of law.
2. Sources of Botswana Law
2.1 Common Law
Roman Dutch law is said to be the common law of Botswana which was inherited from the Cape
Colony. The Roman Dutch law origin is found in Roman law as influenced by Dutch customary
law. It was introduced to the then-Cape Colony in 1652. Over the years it has been influenced
by the English Common law after British colonization of the Colony. The Criminal Law of
Botswana is originated from the English and evidence is based on South African Law. In
Botswana, it has been developed over years by statutes passed by the Parliament and Judicial
decisions.
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2.2 The Constitution
After Britain granted self government in 1964 a constitution was adopted which led to the first
general elections; changing of capital to Gaborone and to independence. The Constitution of the
Republic of Botswana came into effect on independence, and provided for a republican form of
government with three organs of state namely legislature, the executive and the judiciary.
There is no explicit provision making the constitution the supreme law of the land in Botswana.
The Constitution is strictly followed in application of any law and the law is applied without
taking into account the status of the person being tried acts as a guiding principle in application
of law.
2.3 Customary Law
Prior to the establishment of the Bechuanaland Protectorate there existed a variety of

indigenous legal systems living in tribal areas which is now collectively called customary law.
The definition of customary law is given under section 2 of the Customary Courts Act, 1969 and
section 4 of Common law and Customary Act (Cap. 16:01). The 1891 proclamation instructed
the High Commissioner to respect the native laws. Therefore these indigenous peoples’ laws
received recognition but did not get to be incorporated into the general law of the country. The
1966 Constitution of Botswana did not change this position and it remains so today.
2.4 Legislation
Legislation refers to laws that emanate from passed parliament or bodies to which parliament
has delegated powers to legislate. Laws passed by parliament are called Acts and orders,
proclamations, by-laws, regulations or rules refer to those laws passed by a subordinate
authority. Therefore legislation comprises of statutes and subsidiary legislation. Botswana’s
statutes are enacted by the National Assembly as given in terms ss 86 of the Constitution.
When a bill passes through the National assembly and assented to by the State President, it
becomes the Act of Parliament. It comes into effect when published in the Government Gazette
or at a later stage by a notice/proclamation that it will come into effect at a particular date.
2.5 Precedents
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Judicial precedent is the source of law where past decisions create law for judges to refer back
to for guidance in future cases. Precedent is based upon the principle of stare decisis et non
quieta movere, more commonly referred to as ‘stare decisis', meaning to “stand by decided
matters”. A binding precedent is where previous decisions must be followed. A binding
precedent is created when the facts of a latter case are sufficiently similar to the facts of a
previous case. The doctrine of precedent is often referred to as being a rigid doctrine.
Within the court hierarchy, every court is bound to previous decisions made by courts higher
than them. At the very top of the court hierarchy in Botswana is the Court of Appeal, followed
by the High Court, the Industrial Courts, Migistrates Courts and then Customary Courts.
3. 0 Interpretation and citing of Botswana Statutes
The statute are cited as promulgated in the latest consolidation e.g . Mental Disorders (Cap.
63:02). When the statute has been passed after the consolidation publication, an ordinary way
of citing is used eg Public Service (Amendment) Act 15 of 2005.
4.0 Sources of Botswana Company law
Derive mainly from the legal framework as described above. The following are the different
sources of company in Botswana.
 Case law
 Companies Act
 Other legislation
5.0 The new Companies Act 2003
The new Companies Act 32 of 2003 which came into use in 2007 ushered in a new corporate
era. The Act repealed the 1959 Companies Act which commentators had labeled as having lost
touch with the modern trends of corporate matters.The 1959 Act was based on the English
Companies Act of 1948. The companies Act was introduced to:
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 To modernise company incorporation regulatory framework.
 To enable a country to more competitively respond to challenges and opportunities in a

fast changing and increasingly difficult globalized environment,
 To facilitate better trade and enable small medium and micro enterprises to access
business opportunities in Botswana.
 Improving services and encouraging liberalization in the registration of companies.
The new features of the act also include simplified procedures for incorporation. The
memorandum and articles of association which were considered by many in the business world
to be a headache were replaced by provision of a constitution. Though companies have the
choice to decide if they want to present a constitution in their applications, they are not bound
to do so because the actual companies act can represent the company’s constitution.
The new companies act has also done away with the doctrine of ultra vires and constructive
notice. In the old act, the memorandum and articles of association stipulated the line of
business that the company was due to pursue. But abolition of the memorandum and articles
of association effectively mean that companies are now not restricted to any scope of business
but can now pursue any business that they wish to.
The new companies act also introduces a new concept called a close company, which is
specifically designed to meet the needs of SMMEs. In the past, a minimum of two directors
were needed to form a company. Investigations have revealed that some people were forced to
include others as minority shareholders while they did not necessarily want to do business with
them.
The New Companies Act commenced on the 3rd July 2007. It is modern and incorporates
fundamental changes in the concept and style of running of a company.One of the main aims of
the Act is to increase the speed with which a company can be incorporated by permitting the
registrar of companies to delegate his powers to issue and sign certificates of incorporation.
Example
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What is the object of Botswana Companies Act of 2003?
Suggested Solution.
The government‟s vision to bring the country to a competitive advantage by mordernising the
Act. One of the pillars of competitiveness is said to be „institutional environment, which is
determined by the legal and administrative framework within which, firms and government
interact to generate wealth.
Question 1
Outline the major changes to the 2003 Companies Act
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Unit 3
Types of companies
Learning Outcomes
 To consider the nature of a company and compare it with other forms of business
 State the advantages of incorporation
Examination Context
(i) Give advice about the type of business to operate.

3. Chapters 1 Dignam, A. and J. Lowry Company Law. (Oxford: Oxford University Press 2006)
fourth edition [ISBN 0199289363].
4. Companies Act 42:01 Section 19-24
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1.0 Introduction
We learnt that a company acquires legal personality and is regarded as an entity that can
acquire rights and duties which are separate from those of its members. However, this principle
should not be abused and the corporate veil can sometimes be lifted. In this learning unit, we
highlight the different types of companies that can be incorporated in terms of the Companies
Act.
2. Classification of commercial companies (ss 19)
The Companies Act 42:01 requires that all entities must be classified as a private company,
exempt private company, a public company or a close company. Each of these types of
company has distinguishing characteristics.
2.1 Companies limited by shares
Company law is mainly concerned with the company limited by shares (that is a company
where the liability of the shareholders for the debts of the company is limited to the amount
unpaid on their shares). Companies limited by shares are also subdivided into public and private
companies limited by shares. Private (called "Proprietary") and public limited companies are
two most common business entities used in Botswana.
2.2 Differences on minimum requirements and other
Nature of Organization Minimum number Other requirements
Proprietary Limited Companies 1 Director Should have a Secretary and
Public Limited Companies 2 Directors registered office.
Private company cannot have more than 25 members and it cannot make public offer to
subscribe to shares or debenture as this is limited by the constitution. It may restrict right to
transfer shares. Private company may dispense with shareholders' meetings through
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resolutions of all the members of the company. Exempt private company does not need to have
an auditor. Exempt private company does not need to comply with IFRS. A private company
does not need an annual report or Directors' Interests Register with unanimous consent of
shareholders. Private companies may remove a director by special resolution.
A public company has an unlimited number of shareholders (any number) and is usually listed
with the Botswana Stock Exchange. The shares of a public company are made available to the
public for sale. A public company is identified with a designation of ‘Limited’ at the end of the
name. Public companies, on the other hand, are formed specifically to raise large amounts of
money from the general public. The overwhelming majority of companies in Botswana are
private companies limited by shares. Virtually every small and medium sized business, which is
registered as a company, is registered as a private limited company. In comparison with a public
company, a private company is cheaper to form and has fewer registration rules and other
formalities. The main disadvantage of a private company is that it cannot issue invitations to
the public to buy its shares. For this reason, large companies with shares quoted on the Stock
Exchange are registered as public companies.
2.3 Exempt private company
Exempt private company does not need to have a qualified company secretary. All other
characteristics of a private company are maintained.
2.4 Close Company (ss 248-276)
A close company is formed by one or more individuals, not exceeding five, who qualify for
membership. No corporate body or trustee shall directly or indirectly hold a member’s interest
in a close company (Sec. 249). Every person who is to become a member upon registration shall
make to the company an initial contribution of money, property, or services rendered in
connection with the purposes of the formation and incorporation of the company. It may not
be established for or carry on business of banking, or insurance but may otherwise be formed
to carry out any lawful business. The designation ‘CC’ has to be added to the name. e.g. ROC CC.
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Unlike other company types, a Close Company is not expected to meet international financial
reporting standards, but it has to keep books of accounts.
Every CC should have members' interest in the place of shares. Members' interest is a
percentage. It is a movable like a share but not a share in terms of procedures attached to
transfer, sale, purchase.
2.5 Company Limited by Guarantee
This type of company is an entity that does not declare dividends or share profits amongst
members and is registered after a License is granted by the Minister of Trade and Industry.
When applying for a company limited by guarantee, it is necessary to describe as clearly as
possible what the Company is being formed to do, who the donors are, as well as any projects
that are already in place. Please note that the proceeds of the company shall be issued to
promote the objects of the company and only support the objectives of the company. These
companies were designed for charitable or public interest ventures where no profit is
envisaged. As a result the people behind the venture guarantee to pay a certain amount
towards the debts of the company should it fail.
2.6 Summary
This section covered the types of companies that are covered by the Companies Act 42:01. One
of the most obvious differences between the company and other forms of business
organisation is that the members of both private and public companies have limited liability
and the word ‘limited’ or ‘Ltd’ must appear after a private company’s name or ‘plc’ after a
public company. This means that the members of the company are only liable for the amount
unpaid on their shares and not for the debts of the company.
Example
Distinguish between a public and a private company in respect of the following: Name, Number
of directors, offer of shares to the public, company secretary and audit committees.
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Suggested Solution.
A private company must include the words "proprietary" and "limited" or the abbreviation of
the words in its name, that is, (Pty) Ltd. A public company must not include the word
"proprietary" or its abbreviation, but must include “ limited" or its abbreviation in its name.
A private company must have a minimum of one director. No maximum is stipulated in the Act.
A public company must have a minimum of three directors. No maximum is stipulated.
However, the company's MOI may stipulate a higher number for the minimum.
A private company may not offer its shares for sale to the public under any circumstances and
the transferability of its shares is restricted. A public company may offer its shares to the public
under the conditions stipulated in the Act and in terms of its MOI.
A private company is not required to have a company secretary but may appoint one. A public
company must appoint a company secretary.
A private company is not required to appoint an audit committee unless its MOI indicates that
the company elects to comply voluntarily with the provisions of Chapter 3 of the Companies
Act, 2008, which deals, inter alia with, the appointment of an audit committee. A public
company must appoint an audit committee annually.
Question 1
What is the distinction between companies limited by shares and companies limited by
guarantees as it relates to ss 1?
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Unit 4
Incorparation of companies and constitutions

Learning Outcomes
 Describe the procedure for registering companies: private companies and public
companies.
 Explain the effect of a company’s constitutional documents.
 Explain how the company’s constitution can be changed.
Examination Context
(i) Give advice on required documents and procedures for incorparation.
(ii) Give advice on the effect of having or not having a company constitution

Companies Act ss 29-44
www.bitc.co.bw/company-and-business-name-registration
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1.0 Introduction
You have learnt about the different types of companies that may be formed in terms of the
Companies Act. They may have distinctive characteristics, but all companies have one thing in
common: once they are registered, they are recognised as separate legal entities or juristic
persons. Before a company is recognised as a legal person, there are various steps that need to
be taken. There is the registration of the company as well as the registration of the company’s
name. Below, we explain the process of incorporation of a company.
2.0 Procedures and requirements for the incorporation of companies
This is governed by ss.19-24 Companies and administered by the Registrar of Companies and
Intellectual Property (ROCIP). The Companies and Intellectual Property Authority (CIPA) is
mandated to register businesses and protect intellectual property rights through the
administration of four (4) pieces of legislation namely; The Companies Act (CAP 42:01),
Registration of Business Names Act (CAP 42:05), Copyright and Neighbouring Rights Act,
(CAP.68:02) and the Industrial Property Act, (CAP.68:03).
The Authority is headed by the Registrar General who oversees the operations of all divisions of
the Authority and ensures that it achieves the mandate for which it was set up. The following
are the procedures for incorporation in Botswana.
2.1. Name reservation
Reserve a unique company name through the Companies and Intellectual Property Authority.
The entrepreneur can search the online database to check whether the desired company name
is available for registration. This database is available on the website of the Ministry of Trade
and Industry (www.mti.gov.bw). The entrepreneur then submits the Name Reservation Form
(Form 1) to the Registrar of Companies and receives a notification within 3 days. Once approved
by the Registrar, the company name is reserved for a period of 30 days.
The entrepreneur or company representative must submit the following documents:
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 Limited Liability Company Registration Form (Form 2). This form must be accompanied
by the consent to act as shareholders, directors, auditors, company secretary and
registered officers, along with copies of their national IDs or passports.
 Declaration of Compliance of Statutory Requirements (Form 3). This form must be

accompanied by the particulars of the company secretary and his/her valid practicing
license. According to the Company Amendment 2012, Form 3 can be signed by a legal
practitioner, a director of the proposed company, or a class of person as the Minister
may prescribe or also commissioned by law enforcement officers.
2.2 Registration with the Registrar (ss 21 and 25)
Register the company at the Registrar of Companies, Ministry of Trade and Industry.To register
the company, the entrepreneur must submit a completed application form, along with the
name registration certificate and the declaration of compliance of statutory requirements for
company registration. Company detailes are captured and a unique registration number and
certificate of incorporation is issued.
The Certificate of Incorporation is a conclusive evidence that all the legal requirements have
been complied with and that the company assume all the powers, rights and capacity to carry
out any business activity as according to the constitution of the company. The major change
from the old Act was the removal of the ‘object clause’ that restricted the type of business that
a company can do thus creating the doctrine of ultra vires. This now implies that a corporation
can do any activity as long as it is lawful.
2.3 Business license and Registration with BURS
The entrepreneur has to obtain either industrial license if the company involves in production
(Manufacture) from the Industrial Affairs Department or trading license from the Gaborone City
Council. After inspection of company premises by the Health Department, Environment
Department and Town Planning Department of Gaborone City Council will issue license if
requirements complied with minimum standards. Business founders can either obtain an
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industrial license from the Industrial Affairs Department, Ministry of Trade and Industry or
obtain a trading license from the Gaborone City Council.
The company applies for a Tax Identification Number (TIN) number using the BURS form. The
company then completes a taxpayer registration form to enroll in the employee withholding
Pay–As-You-Earn tax (PAYE).
To register a company, a Certificate of Incorporation (Form 4), a copy of the company

constitution if any and other documents must be lodged with the Commission and the
prescribed registration fee must be paid.
3.0 The company constitution (ss 37-44)
There is no need for a company to have a constitution or Articles or Memorandum of

Association. If a company other than a close company has a constitution, the company, the
Board, each director, and each shareholder of the company shall have the rights, powers,
duties, and obligations set out in Companies Act except to the extent that they are negated or
modified, in accordance with this Act, by the constitution of the company. Where a public
company does not have a constitution then the Companies Act itself is the constitution. If
registered with no constitution, then first schedule is the constitution for proprietary limited
companies.
For companies registered under the old Act, Memorandum of Association & Articles is the
constitution unless it replaces its MOA and AOA with a single document into which it
consolidates its constitution (ss 43).
Company's constitution, if submitted may have so many internal procedures. But just because
it is filed with the Registrar, a third party is not expected to know it. At any time, shareholders
of a company not having a constitution may adopt a constitution by special resolution or may
revoke or alter a constitution.
4. The Memorandum and Articles of Incorporation
The Memorandum of Incorporation contains the following information:
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 Details of the incorporators
 The number of directors and alternate directors
 The share capital (maximum issued)
The articles of association contain the internal regulations for the management of the
company’s affairs. They set out the manner in which a company must conduct its affairs and
govern the rights of the members among themselves (Beattie v E & F Beattie Ltd [1938] 1 Ch
708 ).
The legal effect of a company constitution is described in ss 42 (2). The memorandum and
articles operate as a contract between the company and its members, which both parties are
bound to honour. The following are the effects:
 Each member, in his capacity as a member, is bound to the company as if he personally

had signed the memorandum and articles (Wood v Odessa Waterworks Co).
 The memorandum and articles do not constitute a contract binding the company or any
member to an outsider - or to a shareholder in any other capacity than as a member
(Eley v Positive Government Life Assurance Co Ltd).
 A member has a right to compel the company to act according to the articles even if not
enforcing a right which is personal to himself as a member (Salmon v Quinn & Axtens
Ltd),
 The memorandum and articles constitute a contract between each member and every
other member (Rayfield v Hands),
 Provisions of the memorandum or articles can sometimes form part of an extrinsic

contract between the company and an outsider which can happen in one of three ways:
(i) Where provisions of the memorandum or articles are expressly

incorporated into an express contract between the company and the
outsider.
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(ii) Where there is no express contract but a provision in the
memorandum/articles is incorporated by implication from the conduct of
the parties.
(iii) Where there is an express contract which is silent on a particular matter,

and relevant provisionsin the articles or memorandum are used to fill in
any gaps.
The company is not actually liable to the outsider on the basis of the articles, but under the
extrinsic contract (Re New British Iron Co, ex parte Beckwith).
4.0 Summary of company registration
You have learnt about the procedure for the incorporation of companies. You should,
therefore, be able to advise a person wishing to start a company of the procedure. The purpose
of the Companies Act is to simplify the process for incorporation of companies. Only one
constitutive document – the Memorandum of Incorporation – is required to register a
company. The board of directors, which is responsible for the management of the company’s
business, may, however, adopt rules to regulate internal processes.
Example
Cedric and Isabel work in a tourist office. For a long time they thought about forming a limited
company to commence business as travel agents. They both had substantial financial resources
and last week found ideal premises from which they could trade.
Advise them on the procedures necessary to incorporate a public limited company in Botswana
and as to whether they can use the name Thomas Cook (Windsor) plc Travel Agents including
further procedures which must be satisfied before the company can commence trading.
Suggested Solution.
Reserve name; Declaration of compliance; Register company; Advertise intention of applying

for license; Inspection of company premises; Industrial/ trade license; Open corporate bank
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account; Obtain tax identification number; Register for VAT; Register employees for workplace
injury insurance.
Question 1
What is the effect of company of:
a) not having constitution
b) having a constitution
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Unit 5
Shares and share capital

Learning Outcomes
 Define shares according to the Act
 Consider the relative advantages and disadvantages of the various types of company
security available to an investor.
 Consider the procedure for the transfer of shares and capital reduction in the case of
publicly quoted companies.
Examination Context
(i) Give advice, discuss concerns and apply the requirements of the Act regarding share
registration, shares transfer and capital reduction.
(ii) Consider the relative advantages and disadvantages of the various types of company
security available to an investor.

Section 45-79; Companies Act
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1.0 Shares and share capital
We shall consider the rules and regulations which govern the issuing, purchasing and transfer of
company shares. In terms of the Companies Act, a security is a share, debenture or other
instrument, that is issued by a company. In this topic, we will specifically refer to shares. The
study unit deals with different aspects of shares, such as their legal nature, how they are issued,
and the rights and limitations attached to them.
2.0 What is a share?
The Companies Act defines shares as a movable asset that is transferable property without a
nominal or par value and conferring certain rights to the holder (ss 45). A shareholder is
essentially one of the contributors to the fund that sets up a company. This fund is the share
capital of the company.
3.Classification of company shares (ss 46)
Subject to the constitution of the company, different classes of shares may be issued by a
company, in any time and to any person (ss 50). Shares in a company may:
(a) be redeemable;
(b) confer preferential or limited rights to distributions of capital or income;
(c) confer special, limited, or conditional voting rights; or
(d) not confer voting rights.
In Standard Bank of SA Ltd v Ocean Commodities Inc, the court held that a share usually entitles
its holder to vote at a shareholders’ meeting, to share in dividends if declared by the board, and
to share in any assets of the company after it has been wound up. Therefore, it is clear that
there are personal rights attached to shares. The extent of these rights depends on the class of
shares held.
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Typical rights of shareholders are detailed in the Companies Act (ss 45(2)), but the following are
typical:
 The right to control company through voting at meetings
 The right to information
 The right to share in the profits that have been declared as a dividend
 The right to share in the assets that are left on the winding-up of a company after the
company’s creditors have been paid
In terms of section 45(2), every share, irrespective of its class, has associated with it one voting
right, subject to the provisions of the Act and the MOI if such is present. The MOI may
determine the preferences, rights and limitations. This means that a voting right can be limited,
but not excluded.
The classes of shares most commonly found are preference shares and ordinary shares.
3.1 Preference shares
Preference shares (convertible, participating and cumulative) provide their holders with a
preference over other shareholders to dividends and/or return on capital on winding-up. One
needs to consult the Memorandum of Incorporation of the company, as well as the terms of
issue of the preference shares, to find out in which respect they confer a preference on their
holders. If the preference shareholders have the right to receive dividends first, this right is
usually subject to a dividend being declared. In other words, if the company has not made any
profit, or if the directors decide rather to use profits in the business than to declare them as
dividends, the preference shareholders do not have a right to demand a dividend payment.
In return for the preferential rights to dividends, the right of preference shareholders to vote is
usually curtailed in the Memorandum of Incorporation. However, even if the Memorandum of
Incorporation provides that preference shareholders do not have the right to vote, the
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Companies Act provides that they have an irrevocable right to vote on any proposal to amend
the preferences, rights, limitations, and other terms associated with their shares.
There must always be at least one class of shareholders of the company that can vote at a
meeting of shareholders, and at least one class of shareholders that is entitled to the net assets
of the company upon its liquidation. In other words, a company is not allowed to issue only
preference shares that do not grant their holders the right to vote. The following types of
preference share can be distinguished:
Preference shareholders could be given the preferential right to receive repayment of the
capital they contributed to the company on its winding-up. Additionally, they can be given the
right to share in any surplus assets of the company upon its winding-up after receiving their
capital contributions, but this is the exception rather than the rule.
3.2 Ordinary shares
Such shares constitute the equity share capital of the company; the amount of the dividend
paid fluctuates in accordance with the profits of the company. Ordinary shareholders usually
receive dividends after the preference shareholders have received theirs. Ordinary
shareholders also usually have the right to receive any surplus assets of the company after
settlement of all its debts. Normally, ordinary shareholders will have the right to vote at
meetings of shareholders. In terms of the Companies Act, this right may be curtailed, so that
one class of ordinary shareholders will not have the right to vote.
However, there must always be at least one class of shareholders that has the right to vote,
and, if there is only one class of shareholders, they must all have the right to vote.
3.3 Redeemable Shares
These are shares issued on terms that the company will, or may, buy them back at some future
date. The date may be fixed (e.g. that the shares will be redeemed five years after they are
issued) or at the directors' discretion. The redemption price is often the same as the issue price,
but need not be. This can be a way of making a clear arrangement with an outside investor.
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They may also be redeemable at any time at the company's option. This often done with non-
voting shares given to employees so that, if the employee leaves the company his shares can be
taken back at their nominal value. There are statutory restrictions on the redemption of shares.
The main requirement, like a buy-back, being that the company may only redeem the shares
out of accumulated profits or the proceeds of a fresh issue of shares (unless it makes a
permissible capital). Preference shares are often redeemable.
4. Company share issues
The board of directors has the power to issue shares without approval of the shareholders as
along as it is within the Act or the company constitution. However, if shares confer rights and
obligations other than in the Act or constitution, these shares must be authorised by an
ordinary resolution, either before the shares are issued or within 10 business days after the
issue. The board of directors has the authority to increase or decrease the authorised number
of shares, except to the extent that the company’s Memorandum provides otherwise. Through
an ordinary resolution, a company may subdivide or consolidate its shares The shareholders
may also amend the scope of the authorised share capital by way of an amendment to the
Memorandum of Incorporation by means of a special resolution.
5. SHARES – TRANSFER AND TRANSMISSION OF SHARES
Transfer of shares is the voluntary conveyance of a member's share(s) to another person.

Shares are transferable in such manner as maybe prescribed in the constitution. The transfer is
achieved by the execution of a transfer form by the transferor and its being lodged, together
with the share certificate, with the registrar of the company so that the entry in the company's
register of shareholders can be amended. Actual transfer of the legal title to the shares is
effected when the charge is made in the company's register (ss 48). In most cases approval of
the transfer by the company is a formality, confirmed via a board resolution unless an officer of
the company has previously been authorised to accept share transfers (Bahia & San Francisco
Railway Co, Re (1868) LR 3 QB 584).
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Transmission is the automatic transfer of shares by operation of law. It takes place in a number
of circumstances, that is, in case if the member passes away or becomes insolvent/lunatic.
Transmission of shares also occurs when the shares are held by a company, and it is wound up.
The shares are transferred to the legal representative of the deceased and the official assignee
of the insolvent. The transmission is recorded by the company when the transferee gives the
proof of entitlement of shares.
6. MEANING OF SHARE CAPITAL
A company should have capital in order to finance its activities. Funds raised by issuing shares in
return for cash or other considerations . The Memorandum of Association must state the
amount of capital with which the company is desired to be registered and the number of shares
into which it is to be divided. When total capital of a company is divided into shares, then it is
called share capital. It constitutes the basis of the capital structure of a company.
7. Types of share capital
Share capital of a company can be divided into different categories as:
 Authorised share capital, registered, maximum or normal capital: The maximum

amount of capital, which a company is authorized to raise from the public by the issue
of shares, is known as authorized capital. It is a capital with which a company is
registered, therefore it is also known as registered capital. A company may only issue
shares that are authorised by the Memorandum of Incorporation. However, a
company’s board of directors may increase or decrease the authorised share capital.
They may further reclassify any shares authorised but not issued. Should a company
want to change the classification, authorisation or number of shares, the MOI may be
amended.
 Issued capital: Generally, a company does not issue its authorized capital to the public
for subscription, but issues a part of it. So, issued capital is a part of authorized capital,
which is offered to the public for subscription, including shares offered to the vendor for
consideration other than cash.
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 Paid-up share capital: Amount that members have paid on their shares, excluding any
premium.
8. Capital Maintenance (ss 59)
The reduction of share capital means reduction of issued, subscribed and paid up share capital
of the company which allows funds retained in the capital of a company to be returned to its
shareholders. A share capital reduction is a process governed by the Act as the process involves
reducing a company’s capital, the directors have greater duties to the company, its
shareholders, creditors and other stakeholders to ensure that such a process does not affect
the solvency of the company. As a general rule a company cannot reduce its stated share
capital, buy its own shares or pay dividends out its capital. However, a company can reduce its
capital if according to the regulations of the Act (ss 5(4)) or if authorised by the articles and the
reduction is confirmed by the court. However, a 30 day public notice need to be given before
the alteration of the share capital as stated in the memoradum through a special resolution.
The court will only confirm the reduction if satisfied that the company’s creditors have been
paid or have consented to the reduction, otherwise the reduction is of no effect. After the
reduction, the company is required to give notice of such reduction to the Registrar within 10
days failure of which results in a penalty not exceeding P20 000 (ss 492(2)). The reduction
should not render a company illiquid or make the value of assets be less than the value of
liabilities. In other words, it must satisfy the solvency test (ss 62).
A reduction of share capital can be carried out for several reasons. These include:
 Return surplus capital: if a company has surplus cash or assets it may pay/transfer it
direct to its shareholders by cancelling the shares issued to such shareholders;
 Creating distributable reserves: a company can be prevented from paying out dividends
to shareholders where the company has accumulated realised losses, even if it is trading
profitably. A reduction of share capital can be used to eliminate such losses and/or
increase distributable reserves, enabling the payment of dividends which may be more
tax effective to shareholders; or
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 Supporting a share buy-back or redemption: a company wishing to buy-back or redeem
shares out of distributable profits may carry out a reduction of share capital to create
sufficient distributable profits to carry out the process.
The Act does not prescribe the manner in which the reduction of capital is to be effected,
except that it must be satisfied that every creditor of the company has either consented to the
said reduction or they have been paid off or their interest has been secured. Reduction of share
capital may be effected in one of the following ways: In respect of share capital not paid-up,
extinguishing or reducing the liability on any of its shares; or cancel any paid-up share capital,
which is lost, or is not represented by available assets; or pay off the paid-up share capital,
which is in excess of the needs of the company.
Example
ABC (Pty) Ltd is in the process of being liquidated. Mr Joe Soap, a shareholder of ABC (Pty) Ltd,
wants to know if he will be equally entitled to the surplus net assets of the company upon its
liquidation, distributed to all the other shareholders. ABC (Pty) Ltd has only one class of shares.
Suggested Solution.
In terms of section 36 of the Act, the Memorandum of Incorporation of ABC (Pty) Ltd may be
amended to change the classification of these shares by means of a special resolution. (Note: A
"resolution" is a decision. Study unit 4.3 deals with resolutions.) OR In terms of section 36 of the
Act, the board of the company may decide to change the classification of these shares (unless
stated otherwise in the Memorandum of Incorporation). The board must then file a notice of
amendment of the Memorandum of Incorporation.
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‘Maintenance of a company’s share capital is one of the fundamental principles of company

law’.
Explain how the provisions of the Companies Act 42:02 helps to achieve this objective in
respect of reduction of capital (ss 59) and transfer of shares (ss 48).
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Unit 6
Listing and Prospectus

Learning Outcomes
 Consider the procedures and regulations which must be observed in making public
issues of shares.
 Acquire basic knowledge and understanding of the requirements for public offerings of
company securities in scenarios in terms of the Act.
 State and explain the benefits of listing
 Examine the remedies which are available to a shareholder who has purchased shares
on the strength of misleading prospectus.
Examination Context
(i) Give advice about the requirements for listing on a securities exchange.
(ii) Give advice on criminal or civil liability regarding IPOs

Section 295-310; Companies Act
BSE Act Number 11 of 1994
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1.0 Introduction
One of the main advantages of running one’s business in the form of a company is that a
company has separate legal personality from its shareholders. This means that a company is the
owner of its own assets and is responsible for its own obligations. Another major advantage of
the company as a business form is that it affords the opportunity to raise money from a wide
range of investors through a public offer of shares (IPO). Other forms of financing is debt
financing that takes the form of loans, either in the form of bank loans or debt securities. In this
chapter, we explain the public offerings of company securities, different types of shares, the
requirements regarding capitalisation of profit companies, securities registration and transfer in
terms of the Companies Act .
2.0 Raising equity through an IPO
A company obtains the funds it needs for its business by two possible means: equity financing
and debt financing. For a company that has just gone public, equity financing entails the
issuance of shares through a prospectus in return for money, which then makes up the
company’s share capital. This is called initial public offering (IPO). In the Botswana, these
offerings are registered under the BSE Act of 1994, as amended.
The process of “going public” is complex and expensive but also brings a lot of advantages.
Upon the completion of an IPO, a company becomes a “public company,” subject to all of the
regulations applicable to public companies, including those of the BSE Act of 1994, as amended.
A prospectus is a legally mandated document published by every firm offering its securities to
public for purchase. It must comply with strict legal requirements and is filed for approval with
the country's securities inspectorate such as the Botswana Stock Exchange. The role of the
prospectus is to make investors aware of the risks of an investment so as to arrive at an
informed investment decision. This disclosure also protects the company from claims that it did
not fully disclose enough information about itself or the securities in question.
3.0 Advantages of listing on a stock exchange
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There are significant advantages in listing which can be as follows:
 Provides greater access a large equity capital market for the much needed initial and
growth capital.
 Provides with a means of increasing the number and diversity of security holders, from
large institutional investors to private investors.
 Listing can turn an illiquid investment into one that can generally be realised at any
time.
 Provides a raised profile of the company in the financial and product market, track
record of sound management, good profitability and share performance.
4.0 When is a prospectus required?
Section 298 (1) states that whenever shares are to be issued to the public the company that is
listed on the stock exchange must issue a prospectus without which it is prohibited. Prospectus
means an open invitation to the public to take up the shares of the company thus a private
company need not issue prospectus. Even a Public Company issuing its shares privately need
not issue a prospectus.
Any person who contravenes any provision of Section (1) and, if such person is a company, any
director or officer of such company who knowingly is a party to the contravention, shall be
guilty of an offence, and is liable on conviction to the penalty of P100 000 or to imprisonment
not exceeding two years (as set out in section 492(3)).
4.1Contents of a prospectus
All fundamentals have to be mentioned in prospectus, which are necessary for investors for
taking decision deliberately, such as, prices of shares, classes of shares, date of issuing, maturity
period, return from investment, or other general provisions, which is related to issuing of
shares, should be mentioned in prospectus. Section 7 of the BSE Act 1994 sets out items of
information that may be required to be included in the prospectus.The requirements vary
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according to the nature and circumstances of the applicant as set out in Section 12 to 15 of the
BSE Act 1994.
The information is set out under the following paragraph headings:
 The applicant and its capital
 Directors, managers and advisors
 Securities for which application is being made
 Group's activities
 Financial information
 General information
 Documents and consents to be available for inspection
 Vendors
4.2 Untrue statements in the prospectus
Prospectus is the soul of any company. On the basis of the contents of the prospectus, the
general public makes up their mind whether to invest in that company or not. Hence the
statements in the prospectus hold a great gravity of being absolutely true. But if there is any
false information given in the prospectus and the public acts upon that, the Companies Act
provides for provisions for the persons that who would be held liable for misleading the
public. Section 295 provides examples of untrue statements relating to a prospectus as
including:
 Misleading statements which could either be it form and or context,
 An omission from a prospectus where such ommsion is calculated as misleading.
Not only in prospectus, but a statement can be said to mislead even if it is present in any report
or memorandum by reference incorporated therein or issued therewith. The liability accrues
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where any person subscribes for any shares or debentures on the faith of the prospectus for
any loss or damage he may have sustained by reason of untrue statement included therein.
Section 315 of the Companies Act, makes every person mentioned in Section 313 (1) and (2),
shall be guilty of an offence and be liable to a fine not exceeding P200 000 or imprisonment for
a term not exceeding five years. These would include Directors of the company, Promoters, or
even the company.
5.0 Listing authority, listing requirements and procedures
The BSE was established in terms of the Botswana Stock Exchange Act No 11 of 1994 which
governs the activities between the BSE and its members. The BSE is the competent authority
responsible for:
 The list of the securities which may be dealt in on the BSE;
 Applications by applicant issuers and existing issuers for the inclusion of securities on
the BSE official list; and
 The annual revision of the list.
The BSE Listing Requirements are applicable to listing applications by both foreign and domestic
companies and for primary and secondary listings. A company seeking admission to the Main
Board must make an application for a listing to the BSE. The following are the BSE Listings
Requirements.
1. Registration: The issuer must be duly incorporated or otherwise validly established

under Companies Act.
2. Market capitalization: An issuer must have a subscribed capital of at least BWP50.0

million.
3. Audited accounts: A new applicant must include a report of historical financial

information, prepared in accordance with IFRS and any guidelines issued by the
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Botswana Institute of Accountants and/or the Botswana Accountancy Oversight
Authority.
4. Profit history: The issuer must have a satisfactory profit for the preceding three (3)
financial years, the last of which reported an audited profit of at least BWP1.0 million
before taxation.
Issuers that do not have a track record or that have an inadequate track record must
prepare a profit forecast for three (3) years; provide details of the assumptions made in
arriving at the forecasts; and provide reasons to the BSE as to why it should consider listing
the issuer on the Main Board.
5. Shareholder spread: At least thirty (30)% of its securities must be held by at least three
hundred members of the public (equity securities) and for dual listed entities must have
at least three hundred public shareholders who are resident in Botswana.
6. Registered advisors: Only approved advisors the BSE and recorded on the BSE Register
for Registered Advisors may act as an advisor for an issuer for listing related matters or
an issuer applying to list on the BSE.
7. At least 75% of securities be held by promoters provided that the individual

shareholdings will be dematerialized and that these shares be prohibited for resale for a
minimum of two (2) years, and confirmation to that effect from the Botswana CSDB
must be lodged with the BSE.
Summary
An initial public offering, or IPO, is the very first sale of stock issued by a company to the public.
Prior to an IPO the company is considered private, with a relatively small number of
shareholders made up primarily of early investors (such as the founders, their families and
friends) and professional investors (such as venture capitalists or angel investors). The public,
on the other hand, consists of everybody else – any individual or institutional investor who
wasn’t involved in the early days of the company and who is interested in buying shares of the
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company. Until a company’s stock is offered for sale to the public through a prospectus under
the rules and regulations of the country , the public is unable to invest in it.
Example
What are the advantages of going public?
Solution
The most obvious reason to go public is to raise capital. Unlike a private offering, there are
norestrictions imposed on a company with respect to offerees or how many securities it may
sell. The funds received from the securities sold in an IPO may be used for common company
purposes, such as working capital, research and development, retiring existing indebtedness
and acquiring other companies or businesses.
 Going public creates a public market for a company’s securities. Liquidity is important
for existing and future investors, and provides an exit strategy for venture and hedge
fund investors.
 Following an IPO, a company should have greater access to capital in the future. Once a
public market is created, a company may be able to use its equity in lieu of cash or more
costly debt financings.
 Public companies have greater visibility. The media has greater economic incentive to
cover a public company than a private companybecause of the number of investors
seeking information about their investment.
 Going public allows a company’s employees to share in its growth and success through
stock options and other equity‐based compensation structures that benefit from a more
liquid stock with an independently determined fair market value. A public company
may also use its equity to attract and retain management and key personnel.
Learning Activity
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What sanctions are provided by the Act against those who are responsible for false or
misleading particulars (both civil and criminal)?
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Unit 7
Administration of companies: Meetings

Learning Outcomes
 Distinguish between an ordinary, an extraordinary and a special resolution.
 Distinguish between an annual and an extraordinary general meeting.
 To examine the various ways in which the general meeting can control the activities of
directors.
Examination Context
Give advice, discuss concerns, and apply the requirements for the governance of companies,
including the meeting requirements in respect to notices, quorums and voting relating to
special resolutions, in scenarios.

Chapter
Section 105-110; Companies Act 42:02.
Second schedule; Companies Act 42:02
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1. Introduction
You have learnt that a company may divide its shares into different classes and that the holders
enjoy different rights according to the class of shares that they hold. You will now learn who is
responsible for taking decisions in companies. These decisions are taken at different types of
meeting. The will of a company’s members is now normally expressed at a general meeting
when they may vote for or against any resolution proposed. In this unit, we explain what
happens at these meetings and the important role that shareholders play.
2. Kinds of Meeting
Meetings are the major way shareholders (the owners of the company) can make their opinions
known to the directors (the managers of the company). This area is covered by Part 13 CA’06.
There are different types of meeting (e.g. General Meetings, Class Meetings) and the general
rules are that it should be properly convened and conducted with a minimum number of
people present, and voting has to be properly carried out (s.301). Historically, the idea was that
meetings could be conducted face-to-face, although a proxy (someone attending on a
shareholders behalf) has always been allowed. With modern expertise, audio and visual
technologies allow valid meetings to be conducted without the need to physically meet
(s.360A): Byng v London Life Association Ltd [1990] Ch 170 (CA).
A company may provide for a shareholders’ meeting to be conducted by electronic

communication. Where a company allows for participation in a meeting by electronic
communication, a notice convening the meeting must inform the shareholders or their proxies
of the opportunity to participate electronically. Costs of participation are borne by the
shareholder.
2.1 Annual General Meeting
CA 1985 s.366 provides that an AGM must be held every calendar year with not more than 15
months between meetings. A newly incorporated company must hold its first AGM within 18
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months of incorporation. If a company does not hold an AGM as required, any member can
apply to the Secretary of State to call or to direct the calling of the meeting. Members of a
private company can choose to dispense with the holding of an AGM by elective resolution -
but any member of such a company can require that an AGM be held in a particular year by
giving notice at least 3 months before the end of the year.If it is impracticable to call a meeting
or conduct a meeting in the manner prescribed by the company’s articles, any member or
director who would be entitled to vote can apply to the court which can order the meeting to
be called or held: (Re Sticky Fingers Restaurant Ltd).
The usual Business of an AGM can involve:
(i) Directors lay before the company annual accounts and reports for the most recent
financial period.
(ii) Auditor's term of office ends at AGM, so they must be re-appointed or new auditors
must be appointed.
(iii) Director's recommendation for the dividend to be paid to shareholders will be voted on.
(iv) The Articles may provide that directors are to retire in rotation. Some directors will
retire at the AGM and must be re-appointed or replaced.
(v) Resolutions may be required to pay directors’ and auditors’ fees. (Now normally fixed by
contract).
(vi) Shareholders may have their own resolutions placed on the agenda.
2.2 Special Meetings (ss 106)
Any meeting which is not an AGM. Special meetings of shareholders. A special meeting of
shareholders entitled to vote on an issue may be called at any time by
(a) the Board; or
(b) a person who is authorised by the constitution to call the meeting.
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A special meeting shall be called by the Board on the written request of shareholders
holding shares carrying together not less than 10 per cent of the voting rights entitled to be
exercised on the issue.
2.3 Meeting by Court (ss 108)
If the court is satisfied that it is impracticable to call or conduct a meeting of shareholders in

the manner prescribed by this Act or the constitution or it is in the interests of a company
that a meeting of shareholders be held, the court may order a meeting of shareholders to
be held or conducted in such manner as the court directs. This application to the court may
be made by a director, or a shareholder, or a creditor of the company.
The court may make the order on such terms as to the costs of conducting the meeting and
as to security for those costs as the court considers appropriate, and the court may give
such directions as it considers appropriate including the direction that the legal personal
representative of any deceased member may exercise all or any of the powers that the
deceased member could have exercised if he or she were present at the meeting.
3. Convening Meetings
3.1 Notice of Meetings
Authority to Call a Meeting normally rests with the directors. If person without authority
issues notice of a meeting the notice is void.. Table A provides that notice must be given to
all shareholders, directors and auditors. Failure to notify someone entitled to notice will
invalidate the meeting unless the failure was purely accidental: (Young v Ladies Imperial
Club; Re West Canadian Collieries Ltd).
Articles can set any length of notice, but by s.369, notice must be at least 21 days for an
AGM, or 14 days for an EGM - unless all members agree shorter notice period as set out by
articles. Table A requires notice to specify date, time and place of meeting and a general
indication of business to be dealt with. Notice must state if meeting is an AGM. If meeting is
being convened to pass a special or extraordinary resolution, or a resolution for which
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special notice is required, these resolutions must be set out in full in the notice. Notice will
be invalid unless it contains enough detail to allow a reasonable shareholder to judge
whether he needs to attend the meeting: (Baillie v Oriental Telephone & Electric Co Ltd).
Some kinds of resolution require special notice to be given, e.g. resolution to dismiss a
director, resolution to appoint replacement director at same meeting as dismissal,
appointment or retention of public company director aged 70 or over, resolutions
concerning dismissal or appointment of auditors.
3.2 Conduct of Meetings
The following are the basic elements of a meeting:
 Have a quorum: the minimum number of persons who must be present before the
meeting will be valid. A meeting held without a quorum cannot validly transact any
business: (Sharp v Dawes).
 Chairman: Usual to have a chairman to preside over a meeting - Table A provides

this should be the chairman of the board or another director nominated by the
board. Chairman’s role is to keep order - he/she has no power to adjourn or dismiss
a meeting unless this is specified in the articles. Chairman has no casting vote unless
given one by the articles.
 Minutes: Companies must keep minutes of general meetings at the registered office
for inspection by members. Chairman signs the minutes - they then become prima
facie evidence of what occurred at the meeting.
 Voting and Proxies: There are two methods of voting at company meetings: (i) Show
of Hands, and (ii) Voting by Poll. Companies may allow a member who cannot
attend a meeting to allow a proxy to vote in his place. A proxy can vote (s.324) and
they are key, particularly in public companies where shareholders are disperse and
often cannot attend in person. Corporate shareholders (s.323) can also vote at a
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meeting via a human representative. Appointment of proxy must be in writing and
lodged with company before meeting.
3.3 Resolutions (ss 94)
A board resolution, also sometimes called a corporate resolution, is a formal document that
makes a statement about an issue that is so important that the board wants to have a record of
it. A resolution is a document stands as a record if compliance comes in to question. A
resolution can be made by a corporation’s board of directors, shareholders on behalf of a
corporation, a non-profit board of directors, or a government entity. Shareholders' resolutions
can be one of the following:
3.3.1 Special Resolutions (ss 2)
A special resolution means a resolution adopted with the support of at least 75% of the voting
rights exercised on the resolution, or a different percentage as contemplated in section 65(10).
Requires vote of 75% of members present in person or by proxy, who are entitled to vote and
do vote. Meeting at which resolution is proposed must have had at least 21 days notice, unless
shorter period was agreed by majority in number of members holding at least 95% of the
shares. Certain matters can only be decided by special resolution and the articles cannot
provide to the contrary.
3.3.2 Unanimous Resolutions (ss 2)
A unanimous resolution is the same as a special resolution but passed without any dissenting
vote, that is nobody must vote against the resolution. Any unit holder who does not attend (or
send a proxy to vote), or attends and chooses not to vote, is not counted as a dissenting vote.
3.3.3 Ordinary Resolutions (ss 95)
Most matters can be decided by ordinary resolution and some must be (e.g. decision to remove
a director). Ordinary resolution requires simple majority - 50% + 1 vote of members present in
person or by proxy. An ordinary resolution means a resolution adopted with the support of
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more than 50% of the voting rights exercised on the resolution, or a higher percentage as
contemplated in section 65(8).
3.3.4 Written Resolutions (ss 107)
Also called Resolution in lieu of meeting. A company need not hold any particular meeting if all
members entitled to attend that meeting agree thereto in writing and in that event a
unanimous resolution shall be deemed to be a resolution passed at that meeting on the date on
which the last signature to that resolution is affixed. It shall not be necessary for a private
company to hold an annual meeting of shareholders under section 105 if everything required to
be done at that meeting (by resolution or otherwise) is done by unanimous resolution.
Summary
In this study unit, we explained and applied the requirements regarding governance of
companies, including the meeting requirements regarding notices, quorums and voting relating
to special resolutions in terms of the Companies Act.
Example
FUN Ltd has 100 million fully paid ordinary shares on issue. It also has 10 million preference
shares on issue. The rights attached to the preference shares are stated in the company’s
constitution. The constitution permits the class rights to be varied or abrogated only if the
preference shareholders approve of the change by special resolution at a separate class
meeting. For the purposes of the class rights variation procedure, any reduction in the
company’s issued preference share capital is deemed to involve a variation in the class rights of
the preference shareholders. The preference shares:
 can be voted in a general meeting only in the circumstances required by the ASX Listing
Rules, and as referred to in the Corporations Act s 9 definition of ‘voting share’; and
 carry the right to be repaid share capital in a winding up in priority to ordinary

shareholders.
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The directors of FUN Ltd have resolved that the company should reduce its share capital by
returning $1 per share to the company’s ordinary shareholders. No shares will be cancelled as a
result of the reduction. Some preference shareholders, who in aggregate hold about 20% of all
of the preference shares, do not support the capital reduction. Please advise them as to the
procedures that the company will have to comply with to effect the reduction.
Solution
On the facts, this appears to be an equal reduction. Section 256B(2) should have applied to the
facts. Thus the buy-back may occur subject to the company satisfying the requirements of s
256B(1). One of the requirements is that the reduction must be approved by shareholders
under s 256C: s 256B(1)(c). In this case, an ordinary resolution of the shareholders in general
meeting will suffice: s 256C(1). The preference shareholders would be entitled to vote on that
resolution because of their class rights: cf clause (b) of the s 9 definition of ‘voting share’.
Question 1
In relation to company law, explain and distinguish between:
(a) annual general meetings and special general meetings
(b) ordinary resolutions and special resolutions.
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Unit 8
Administration of companies: Majority and Minority rule

Learning Outcomes
 Interpret the principle of majority rule and when minority can take action
Examination Context
(i) Identify circumstances in which the principle of majority rule can be set aside.

Chapter 21; Kapoor, N.D. 2008. Elements of Company Law, 8th Edition
Section 166-176; Companies Act 49.02.
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1. Introduction
Corporate democracy is presumed when the will of the majority constitute the decision of the
body, however the application of this principle has been targeted on the minority creating
adverse effect on them. The aim of this study unit is to discuss the principle of majority rule in
company administration and minority protection therein.
2. Majority Rule And Minority Protection
The general rule in company law is that the wishes of the majority will prevail. Companies take
decisions through majority vote. This rule is not contained in the Companies Act itself, but is a
common law rule.
In Foss v Harbottle (1842), where two minority shareholders brought an action against the
company’s directors alleging that they had defrauded the company in a number of ways,
including selling land to the company at an exorbitant price. The action failed, the court holding
that the alleged wrong was done to the company and only the company alone can sue. In other
words, the proper plaintiff in that case was the company and not the two individual
shareholders.
3. The principles in the rule in Foss and Harbottle
This rule is derived from two general legal principles of company law. Firstly, a company is a
legal entity separate from its shareholders. Secondly, the Court will not interfere with the
internal management of companies acting within their powers. Where an ordinary majority of
members can ratify the act, the Court will not interfere. This simply means, if the majority can
ratify an act, the minority cannot sue.
The justification for the rule has been that it limits the multiplicity of suits by individual
shareholders and secondly that it promote shareholders democracy and this was succinctly
stated in Sammel v President Brand Gold Mining Co. Ltd.
1. Common Law Exceptions to the Rule in Foss v Harbottle
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The majority supremacy, however, does not prevail in all situations. The operative field of the
rule in Foss v. Harbottle extends to cases in which the corporations are competent to ratify
managerial sins. But there are certain acts which no majority of shareholders can approve or
affirm. In such cases each and every shareholder may file a derivative law suit to enforce
obligation owed to the company. Derivative actions are claims brought by individual
shareholders, acting on behalf of a company, against the company’s directors. They are brought
in respect of wrongs committed against the company that, for whatever reason, the company is
not willing to pursue in its own right.
The common circumstances in which such actions may be brought are very limited, due to the
general rule (known as the rule in Foss v Harbottle) that the proper person to bring them is the
company itself. Specifically, the commom law is that a derivative action may only be brought
under exceptional circumsatnces.
It is only in exceptional circumstances where a member or members could be given the locus
standi to institute an action on behalf of the company. They are four recognised common law
exceptions to the Foss v Harbottle rule, in which a minority shareholder can act as a
representative of the corporate interest comprising the following:
a) An act which is illegal or ultra vires (sic) to the company. Acts ultra vires A shareholder is
entitled to bring an action against the company and its officers in respect of matters
which are ultra vires and which no majority of shareholders can sanction. The rule in
Foss v. Harbottle applies only as long as the company is acting within its powers
b) An irregularity in the passing of a resolution which requires a qualified majority. Where

an act by statute requires a specified majority, failure to comply is not a mere
irregularity (Bailee v Oriental Telephone and Electric Co Ltd [1915] 1 Ch 503).
c) An act purporting to abridge or abolish the individual rights of a member. A

fundamental aspect of the principle of majority rule is that a member cannot sue for a
wrong done to the company (Appenteng v Bank of West Africa [197211 GLR 153). The
courts however make distinction between a cause of action falling within the proper
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plaintiff rule and situations where there is an infringement of the personal rights of
members.
In Heron International v Lord Grade [1983] BCLC 244, Lawton LJ held that:
“ Foss v Harbottle .. has nothing to do with a shareholder;s right of action for a direct
loss caused to his own pocket as distinct from a loss caused to the coffers of a company
in which he holds shares.”
It has been argued since a shareholder has a general right to have the affairs of the
company conducted in accordance with the Regulations of the Company, any breach of
the regulations by the company would amount to a breach of the shareholder’s
personal rights.
d) An act which constitutes a fraud against the minority and the wrongdoers are
themselves in control of the company. Under this exception, a minority shareholder can
bring an action on behalf of the company, where he can show that the wrong
constitutes a ‘fraud against the minority’; and the ‘wrongdoers are in control of the
company’ and will not allow the company to sue.
Owing to the ambiguity surrounding the notions of ‘fraud against the minority’ and ‘control
by the majority’, the Court has in the past held that the question of the locus standi of
minority shareholders should be dealt with first as a preliminary issue before the trial of the
action.
2. Statutory applicability of minority protection in Botwsana
Under the common law a shareholder seeking to bring an action on behalf of the company was
sometimes confronted with the rigid procedural difficulties laid down in the case of Foss v
Harbottle. The common law derivative action was the only route available particularly to
minority shareholders where those in control of the company were reluctant to launch an
action for the company or where those in control were the wrongdoers hence blocked the
institution of proceedings by the company.
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A shareholder seeking to bring a derivative action under the common law was confronted with
two major hurdles; firstly, that all the documents and records which he/she must rely on to
prove his case are under the control of the directors who happen to be defendants. Secondly
the shareholder is faced with the prospect of being saddled with heavy legal costs should he
not succeed in his application, despite the fact that he/she was not suing on his own interest
but that of the company.
The 2003 Companies Act has ushered in a new statutory derivative action, which expressly
abolishes the common law right of a person other than a company to bring an action on behalf
of the company. Section 166(1) extends the right to bring proceedings in the name and on
behalf of the company. The modernisation of this action demonstrates the lost faith in
shareholders democracy to protect the interest of companies in the wake of the corporate
scandals that occurred in the turn of the 21st century.
The statutory derivative action thus makes it easier for shareholders to bring directors to book
in cases where they have exceeded their powers in acting for the company as a result of which
the company suffered damages. The other advantage offered by the statutory derivative action
relates to payment of costs of the suit, wherein the court may order the whole or part of the
reasonable costs of bringing or intervening in the proceedings be borne by the company unless
it considers the same to be unjust and inequitable for the company to bear costs.
3. Summary
The decision usefully confirms that the rule in Foss v Harbottle still limits shareholder claims on
behalf of the company, except where recognised exceptions apply. Although the 'justice of the
case' may permit a derivative action, it is only grudgingly acknowledged and an applicant would
be better served to rely on one of the other exceptions than to hope that leave to commence a
derivative action might be granted on that basis alone. With regard to Botswana, the common
law shareholder’s personal action against the company has been codified by the 2003
Companies Act. A shareholder now has a statutory right to bring an action against the company
for a breach of a duty owed to him by the company.The shareholder thus brings the action in
his capacity as member of the company and not on a representative capacity for the company.
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Example
Discuss the way in which the courts have interpreted the rule in Foss and Harbottle, including
the kind of conduct which has been held to constitute conduct which is “unfairly prejudicial,
unjust or inequitable” in this context.
Solution
Foss v Harbottle (1843) 67 ER 189 is a leading English precedent in corporate law. In any action
in which a wrong is alleged to have been done to a company, the proper claimant is the
company itself. Courts held that when a company is wronged by its directors it is only the
company that has standing to sue. In effect the court established two rules. Firstly, the "proper
plaintiff rule" is that a wrong done to the company may be vindicated by the company alone.
Secondly, the "majority rule principle" states that if the alleged wrong can be confirmed or
ratified by a simple majority of members in a general meeting, then the court will not interfere
(legal term).
There are several important exceptions that have been developed are often described as
"exceptions to the rule in Foss v Harbottle". Amongst these is the 'derivative action', which
allows a minority shareholder to bring a claim on behalf of the company. This applies mainly in
situations of 'wrongdoer control' and three more other situations. The other cases are Ultra
vires and illegality. The directors of a company, or a shareholding majority may not use their
control of the company to paper over actions which would be ultra vires the company, or
illegal. Also actions requiring a special majority was considered an exception. If some special
voting procedure would be necessary under the company's constitution or under the
Companies Act, it would defeat both if that could be sidestepped by ordinary resolutions of a
simple majority, and no redress for aggrieved minorities to be allowed.
Question 1
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‘The rule in Foss v Harbottle is of continuing importance in modern company law.’
Discuss this statement, explaining the content of the rule, and the distinction between a
derivative action and a personal action. Discuss whether (and if so how) the statutory derivative
action of the Companies Act has alleviated the difficulties, associated with the rule in Foss v
Harbottle, which confront an aggrieved minority shareholder who believes that a wrong has
been done in the context of a company’s affairs, and has not been redressed.
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Unit 9
Management of companies
Learning Outcomes
 Explain the role of directors in the operation of a company
 Discuss the ways in which directors are appointed, can leave their office and the
disqualification of directors.
 Demonstrate an understanding of the way in which common law and statute law has
attempted to control directors
Examination Context
(i) Explain the duties of a director.
(ii) Give advice about whether or not to indemnify a company director.

Chapters 1 Dignam, A. and J. Lowry Company Law. (Oxford: Oxford University Press 2006)
1 Introduction
You have already been introduced to one of the organs of a company: the general meeting of
shareholders. The shareholders of a company exercise their rights and functions entrusted to
them in the Companies Act and the Memorandum of Incorporation by adopting resolutions at a
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meeting of shareholders. We now introduce the other main organ of a company: the board of
directors. We also introduce you to one of the office bearers of the company, namely the
director. The Companies Act provides that a company's board of directors must manage the
business and affairs of that company. A director is a member of the body of people that
manages a company. All the directors of a company together, are referred to as the board of
directors. The board of directors of a company has the authority to exercise all of the powers
and perform any of the functions of the company. In this study unit, we deal with the board and
directors, their appointment and removal, directors having a financial interest in a matter,
standards of directors' conduct, directors' liability, indemnification and insurance.
2 Company directors and their appointment
2.1 The Board and Decision Making
A company acts through the people who represent it. The owners of a company (shareholders)
appoint directors (normally office holders) and delegate the running of the company to them. It
is the directors who make the day to day decisions on the way the company is run. CA 42.01
s.145 - public companies must have at least two directors, private companies at least one.
What constitutes a director is defined in ss 126, ‘Someone who acts in that capacity even if they
are not called, or formally appointed, as a director’. There are different types of director e.g.
exucutive directors, non-executive directors, altenate directors, and nominee directors.
Directors operate as part of that board: Re Marseilles Extension Railway Co Ex p. Credit Foncier
and Mobilier of England (1871) LR 7 Ch App 16 (CA)
The board of directors are chosen to govern the affairs of a company. They must act collectively
and all directors may take part in the decision making process. Decisions have to be taken in
accordance with the company’s constitution and a general rule is that decisions are taken
following a unanimous or majority vote.
Directors make the day to day decisions of the company. This differs to the members who make
the strategic decisions. Clearly the members appoint directors and vote on matters not
reserved for the company’s management. Members do have a reserve power, exercised by the
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passing of a special resolution, to direct directors to take, or refrain from taking, specified
action – but this is rarely done. In many companies, directors are not only shareholders but may
also be majority shareholders, so they can dominate all aspects of the running of a company.
2.2 Appointment, termination and disqualification
Directors do not have to be qualified in any way but there are formalities on the appointment
of directors when the company is first formed (ss.148-150) and subsequently. In public
companies a system of retirement by rotation exists to terminate the directors’ duties, although
they may seek reappointment by the members. Directors can be disqualified from office when a
person ceases to be a director – e.g. if they resign, retire, become bankrupt or become
physically or mentally incapable.
3 Persons who cannot be appointed as directors (ss 146)
(i) Share Qualification-If the articles provide for a share qualification, director must obtain this
within two months.
(ii) Over-age Persons-No upper age limit for private company unless articles so provide. Person
cannot be appointed as director of a public company if he has reached the age of 70,
(iii) Undischarged Bankrupts-criminal offence unless permission given by the court.
(iv) Persons Disqualified by the Court - it is a criminal offence to act as director of a company
while under a disqualification order such as those convicted of an indictable offence in relation
to the company.
(v) Auditors and Secretaries-Auditor and Secretary of a company cannot also be a director of it.
4 Powers of Directors
Directors have sole power to manage the business of the company, but power vests in the
shareholders if the directors are unable or unwilling to act (Barron v Potter). A director who
exceeds his powers may be liable for any loss the company suffers, unless the shareholders
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ratify his actions. Shareholders can now also ratify ultra vires transactions, unless this amounts
to a fraud on the minority.
4.1 Duties of Directors (ss 130(1))
Shareholders can sue the directors for breach of duties. Generally, they have two kinds of
duties. One kind of duties is that they should be efficient, proficient and knowledgeable. Their
technical duties are:
(a) to exercise powers under the act and subject to constitution;

(b) Seek authorisation of general meeting per Act;
(c) exercise skill, diligence and care;
(d) attend meetings with reasonable regularity;
(e) not to incur obligations that the company cannot perform and
(f) to keep proper accounting records.
The other kind of duties is that they should be honest, transparent and should exercise due care
and diligence. Particularly, these are their ethical duties:-
(a) to disclose interests,

(b) not to make the company do illegal things,
(c) to account for his monetary gain (other than his remuneration),
(d) to act as trustee and give over collections on company's behalf,
(e) honesty and in good faith and in the best interests of the company,
(f) not to make use of confidential information and
(g) not to compete with the company.
If you derive material benefit for any transaction with the company, then you have interest.
Entry of your interest should be made in Interest Register. It must be entered in minutes.
Interest Register can be avoided if 100% shareholders agree to it. Subject to the constitution,
interested director can attend the meeting, can sign the minutes, can vote and do anything as if
he is not interested.
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5 Indemnification and director’s insurance
A company may not indemnify a director in respect of liability arising out of certain
circumstances, such as a breach of his or her fiduciary duties. In certain circumstances, a
company may not indemnify a director. Indemnity insurance may also not be taken out for such
circumstances.
A company is, however, entitled to take out indemnity insurance to protect a director against
any liability or expenses for which the company is permitted to indemnify a director. The
company may also take out insurance to insure itself against expenses that the company is
permitted to advance to a director to defend litigation.
The Companies Act makes it impossible to indemnify directors for personal liability arising out
of negligence, an omission, failure to carry out their duties, or a breach of trust. The
Memorandum of Incorporation may also not conflict with any statutory provisions.
The ownership of a company is vested in the general meeting of shareholders/members, and

control of the company is vested in the board of directors. Do you think it is a sound principle to
separate ownership and control, or should the members of the company also manage it? It is
here that the principle of the separate legal personality of the company comes into play again.
It is the company that owns its assets and that is responsible for its liabilities, not the
shareholders. The shareholders only hold a right to share in those assets should the company
be wound up.
Remedies are designed to deter directors from breaching their duties, not to compensate a
company for loss: Murad v Al-Saraj [2005] EWCA Civ 959 (CA) Civil remedies for failing to gain
approval for substantial property transactions (s.195) and loans/quasi loans (s.213), exist in the
Companies Act 2006, as do criminal sanctions for failing to declare an interest in an existing
transaction or arrangement (s.183).
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6. Summary
In this study unit, we explained and applied the requirements regarding board committees,
meetings, and directors acting other than at meetings in terms of the Companies Act.
Example
TechNet (Pty) Ltd is a large computer services firm that specialises in the implementation of
computer networks. As would be expected, TechNet (Pty) Ltd uses leading-edge technology and
its own financial and related systems are fully integrated. The company has fifteen ordinary
shareholders.
Daniel Buys has informed Nancy Loopis of his intention to raise additional finance amounting to
R5 000 000 for the company by issuing further ordinary shares. The company's only authorised
share capital comprises 100 000 ordinary shares that have no par value. However, these shares
have already been issued in full. Daniel Buys has therefore asked Jolly & Hills for advice in this
regard, particularly about the requirements relating to the issue contained in the Companies
Act. It is intended that the directors of TechNet (Pty) Ltd be offered shares. None of the
directors currently holds shares. The company's MOI prohibits shareholders' meetings from
being held via electronic means.
Discuss the sections of the Companies Act, 2008, with which TechNet (Pty) Ltd will need to
comply in respect of the proposed issue, but only in terms of the requirements applicable to
the shareholders' meeting to be held. You must deal with all matters pertaining to the meeting,
for example, the quorum, resolution, notice, etc.
Suggested Solution.
As there is a need to hold a shareholders' meeting, the board will have to provide all
shareholders with written notice … • of the date, time and place of the meeting. • of the
specific purpose of the meeting (to issue shares) (A copy of the resolution must be provided.). •
of the percentage of voting rights required for the resolution (special resolution). • that a
shareholder, who is entitled to vote, may appoint a proxy (this must be reasonably prominently
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displayed on the notice). • that satisfactory identification will be required from shareholders to
attend.
This notice must be given at least 10 business days before the meeting will be held. (The MOI
may stipulate a longer or shorter notice period.)
The meeting to pass this resolution may only begin if 25% of the voting rights entitled to be
voted in respect of at least one matter to be decided at the meeting (there may be other
matters to be covered at the meeting) are present.
For the debate to commence on the share issue resolution, holders of at least 25% of the shares
entitled to vote in respect of the share issue must be present when the matter is called on the
agenda. For TechNet (Pty) Ltd, it means that holders of at least 25% of the (existing) ordinary
shares need to be present. (Note: The MOI may stipulate lower percentages.) The previous
paragraph deals with a voters' quorum. In addition, as TechNet (Pty) Ltd has more than two
shareholders, the meeting may not begin or a matter be debated, unless at least three
shareholders are present at the meeting. At the commencement of the meeting, shareholders'
identities as well as their right to attend or participate must be verified. The person presiding
over the meeting must be satisfied with the validity of the shareholders' identities. The
proposed resolution must be sufficiently clear and specific. It must also be accompanied by
sufficient information to enable a shareholder to decide whether to participate in the meeting
and "influence the outcome" of the vote on the resolution or not. For the (special) resolution
on the share issue to be passed, at least 75% of the voting rights exercised on the resolution
must support it. (Note: The MOI may stipulate a lower [or higher] percentage, but the
difference between the percentage for an ordinary and a special resolution must be at least
10%.)
Voting should be by poll (not by a show of hands). Voting by poll enables those shareholders
with larger shareholdings to exercise greater influence on the vote.
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Question 1
In relation to company law, discuss the appointment procedure relating to, and the duties and
powers of, a company director. (10 marks)
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Unit 10
Winding-up of company operations

Learning Outcomes
 Define liquidation
 Identify circumstances under which voluntary and involuntary liquidation apply
 State offences that directors may be liable to before and during liquidation.
Examination Context
(i) Give advice about the type of liquidation that can be used.
(ii) Give advice on the responsibilities of directors antecedent and during liquidation.

Chapters 1 Dignam, A. and J. Lowry Company Law. (Oxford: Oxford University Press 2006)
Companies Act (324 -471)
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1.0 INTRODUCTION
Winding up a business gives rise to a number of financial, commercial and legal issues that
usually impact a number of stakeholders. This study unit focuses on winding up a company
which ceases to operate as governed by the Companies Act.
2.0 LIQUIDATION
The liquidation of a company is the process by which a company is brought to an end, and the
assets and property of the company are redistributed. Liquidation is also sometimes referred to
as winding-up or dissolution, however dissolution technically refers to the last stage of
liquidation. Liquidation is, with very few exceptions, the end of the road for a company and it
will then be removed from the companies register.
A company is legally insolvent (unable to pay its debts) if it either does not have enough assets
to cover its debts (ie value of assets is less than amount of liabilities), or if it is unable to pay its
debts as they fall due. A liquidation generally occurs where the company is insolvent and the
purpose of the liquidation is to collect its assets, determine the outstanding claims against the
company, and satisfy those claims in the manner and order prescribed by law. An insolvent
liquidation will be either a creditors’ voluntary liquidation (CVL), which is begun by resolution of
the shareholders, or a compulsory liquidation, which is instituted by petition to the court.
3.0 Methods of winding up companies
The Corporations Act 2001 outlines two ways to wind up a company.
3.1 Meaning of Voluntary liquidation (ss. )
Voluntary liquidation is the dissolution or winding up of a solvent company where the liquidator
is appointed by the shareholders and the company’s assets are sufficient to settle all its
liabilities, including statutory interest, within twelve months. A VL involves the orderly winding
up of a company’s affairs and includes ceasing or selling its operations, realising the company’s
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assets, distributing the proceeds of realisation among its creditors, and distributing any surplus
among its shareholders. The process is usually initiated by the company.
If the directors are of the opinion that the company will be able to pay its debts in full within
such period not exceeding 12 months from the date of dissolution after making due enquiry
into the affairs of the company, they may make and sign a declaration of solvency. This
declaration renders the process a members’ voluntary winding up, giving the members a
degree of “control” in selecting the liquidator.
The preparation of the declaration of solvency is a distinguishing feature between a members’

voluntary winding up and a creditors winding up, in that, where such a declaration is not made
and delivered, the company’s winding up is considered to be a creditors’ voluntary winding up.
Generally a voluntary liquidation, which can be either a members' voluntary liquidation or a

creditors' voluntary liquidation, is brought about by resolution of the company and is
conducted by a qualified practitioner.
3.3.1 Circumstances under which the company can be voluntarily wound up
 Where the company has resolved by special resolution that it should be wound up in
terms of Companies Act 2003.
 Where the constitution provides that the company is to exist for a fixed period or until
the occurrence of a particular event. When that period expires or the anticipated event
occurs, the company may then pass a resolution in a general meeting requiring that the
company be wound up voluntarily.
3.3.2 Procedure involved in voluntary liquidation.
 The company in a general meeting then appoints a liquidator to wind up its affairs and
distribute the assets of the company. At this point, the powers of the directors cease
unless the company in a general meeting, or the liquidator, sanctions their continuance.
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 Extraordinary resolution is passed marking the commencement of the dissolution and
consequential winding up process.
 The declaration of solvency must be notified to the Registrar within 14 days from the
date of dissolution.
 The liquidator is obliged to convene a meeting of the members to report on the status
of the winding up process, where the winding up continues for more than 12 months.
 A final meeting is called upon completion of the liquidation, with the laying of the
liquidator’s final accounts.
 The company’s assets are finally distributed to its members.
3.3.3 Procedure in creditors voluntary liquidation
PROCEDURE FOR CVA
1. Proposal
May be made by directors, administrator or liquidator.
2. Nominee
Insolvency practitioner nominated under terms of proposal to supervise its implementation. Where the
company is in administration or liquidation, the administrator or liquidator may act as nominee.
3. Where nominee is not administrator or liquidator

Nominee notifies the court whether, in his opinion, a meeting of creditors should be held in order to
consider the proposal.
4. Where nominee is administrator or liquidator

Nominee proceeds directly to convene creditors’ meeting.
5. Creditors’ meeting
Usually held within eight weeks of the notice of proposal to nominee. May approve, modify or reject
proposal and may choose another nominee. Requires a majority of 75 % in value of the creditors present
and voting. The proposal may not affect the rights of secured or preferential creditors without their assent.
6. Supervisor
If the proposal is approved, the nominee becomes the supervisor and implements the arrangement in
accordance with the terms of the proposal.
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3.2 Winding up by court
Alternatively, a court can make a winding-up order for a compulsory liquidation on the
application of a creditor or of the company itself. Creditors may apply for the company to be
liquidated via the courts, in which case it becomes a compulsory liquidation.
3.2.1 Circumstances under which court winding up is initiated
There are a number of possible reasons for making a winding-up order. The most common is
because the company is insolvent. Solvency is a corner stone of the Botswana Companies Act. A
company is able to buy back its shares or finance a person to buy its own share or reduce the
shares, so long as solvency tests are performed and directors record their opinion that the
company is solvent before making such decisions. A company is solvent when it is able to pay
its debts in the normal course of business and where its assets are in excess of its liabilities.
 Once a company or individual has become insolvent it may be forced to go liquidation.

Legally, a company is insolvent (unable to pay its debts) if it either does not have
enough assets to cover its debts (ie value of assets is less than amount of liabilities), or if
it is unable to pay its debts as they fall due. Insolvency can be established by failure to
comply with a statutory demand requiring payment within 21 days, or by an execution
against the company’s goods which remains unsatisfied.
 A winding-up petition may also be presented by the Secretary of State for Trade and
Industry on the grounds of public interest.
3.2.2 Procedure in a court winding up
 A Provisional Administrator is appointed by the courts to administer the estate or

business of the company as instructed by the courts pending the winding up order/
dismissal.
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 A statement of the company’s affairs, confirmed by affidavit, must be prepared by the
company’s Directors and submitted to the company’s Official Receiver (ministerial
appointee).
 Any act or warrant, whether precautionary or executive, other than a warrant of

prohibitory injunction, issued or carried into effect against the company after the date
of its deemed dissolution, shall be void.
 If the court considers that the company should be wound up it will issue a winding up
order. Liquidation is deemed to have commenced from the date that the winding up
application was presented.
 A meeting of the company’s members and creditors is then called to appoint a

liquidator, and form a liquidation committee. Until a liquidator is appointed, the
functions of liquidator are performed by the Official Receiver.
 A final meeting of creditors is called at which the liquidator presents his accounts.
4.0 Judicial Management
Judicial Management generally refers to situations where a company is unable to pay its debts
but the Court finds that the inability is due to mismanagement or an event that can be
overcome. The reasoning behind this is simply to say that if the company had been managed
well it would not be in the situation it is currently in. Judicial management seeks to assist this
type of company to overcome a temporary setback without going out of business. Application
for judicial management may be made by the company itself, a creditor or a member to the
High Court. An order will be made by court placing the company under judicial management. If
the judicial manager cannot return the company to solvency, then he may recommend to the
court that it is wound up.
4.1 Procedure in judicial management
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PROCEDURE FOR ADMINISTRATION
A. Appointment by court order
1. Company is, or likely to become, unable to pay its debts
2. Application to the court

Presented by company, directors, creditors or liquidator, with supporting statement by
proposed administrator that the purpose of administration is reasonably likely to be
achieved. Notice given to charge holder qualified to appoint an administrator, who
thereby has an opportunity to apply to the court for the appointment of an alternative
administrator.
3. Administration Order
Administrator appointed. Winding-up petition (if any) dismissed.
B. Appointment by company or directors without court order
1. Company is, or is likely to become, unable to pay its debts
2. Notice of intention to appoint

Notice filed at court. Notice (five days) given to charge holder qualified to appoint an
administrator, who thereby has an opportunity to appoint an administrator of his choice.
3. Appointment
Notice of appointment filed at court, together with statement by administrator that the
purpose of administration is reasonably likely to be achieved.
C. Appointment by secured creditor without court order
1. Security must be enforceable
2. Notice of intention to appoint

Notice (two days) given to holder of any prior floating charge. Copy of notice may also
be filed at court to obtain interim protection.
3. Appointment
Notice of appointment filed at court, together with statement by administrator that the
purpose of administration is reasonably likely to be achieved. Winding-up petition (if
any) suspended.
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D. Following appointment
4. Consequences of appointment
No administrative receiver can be appointed. Security over assets cannot be enforced
without consent of the secured creditor. Administrator can sell property subject to hire-
purchase, mortgage, and retention of title, with court’s permission.
5. Duties of Administrator
Manages the business. Proposal for future conduct. Calls meeting of creditors.
6. Creditors’ Meeting
Held within 10 weeks of company entering administration. Proposal approved, modified
or rejected. Majority in value of those voting required to approve proposal. In some
circumstances a meeting is not necessary.
7. Implementation
Administrator reports back to court. Proposal implemented.
5.0 Directors Offences antecedent to or course of Liquidation
When a company is placed into liquidation, either via a Creditors Voluntary Liquidation or a
Compulsory Liquidation, the conduct of the directors will form an integral part of the
investigations made by the office holder. Most directors are not even aware of their duties as a
director of a limited company let alone the issues that could arise as a result of them not
adhering to these duties. However the liquidator will look to see if any offences have been
committed.The main offences which people will have heard before are Wrongful trading and
Fraudulent trading, however these are the most well-known terms used and there are others
which can catch directors out.
4.1 Fraudulent Trading
If in the course of a winding up of a company, whether by the court or voluntarily, it appears

that any business of the company has been carried on with the intent to defraud creditors… the
court may, if it thinks proper so to do, declare that any persons who were knowingly parties to
the carrying on of the business in the manner aforesaid be personally responsible, without any
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limitation of liability for all or any of the debts or other liabilities of the company as the court
may direct.
4.2 Wrongful Trading
Where a company has been dissolved and is insolvent and it appears that a person who was a
director knew or ought to have known prior to the dissolution of the company that there was
no reasonable prospect that the company would avoid being dissolved due to its insolvency.
4.3 Wrongful & Fraudulent Trading cases
Dr Andrew Borg Cardona Noe vs Victor Zammit Et (14.05.2010)
• Directors held responsible for both fraudulent and wrongful trading
• Ignorance is not an excuse
• A director shares responsibility with the other co-directors of the company and is under an
obligation to know and to carry out his legal duties.
Summary
A company’s life must be formally ended by either a voluntary or compulsory liquidation as

initiated by either members or creditors, dependant upon whether or not the company is
solvent. The liquidations differ not only in the solvency of the company, but also in the
resolutions required, appointment of the liquidator and who controls the process. Furthermore,
difficult today for a director to argue that he was not a party to the carrying on of the business
of the company (unless such director registers a dissenting opinion), especially since it is one of
the duties of directors to actually participate in the business of the company.
Example
Wiseacre Construction (Pty) Limited (Wiseacre) has been in the building industry in Botswana
for ten years. Initially, the business was breaking even and occasionally making a profit. In
recent years, however, the business has run into difficulties. Wiseacre had won a government
tender to put up 100 houses in Palapye. In spite of being paid a mobilisation fee of P10 million,
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Wiseacre has been unable to begin construction works in Palapye. Most of the P10 million was
used to pay off debts, substantial portions of which remain unpaid. Tirong Labour Brokers have
a judgement against Wiseacre for P50,000. Wiseacre also owes its building materials supplier,
Betabuild, P3 million. Wiseacre has a P800,000 bank loan with Housing Finance Bank which it
has not paid for 10 months. Betabuild and Housing Finance Bank, the creditors of Wiseacre,
seek your advice as to whether Wiseacre can be the subject of a compulsory liquidation.
Required:
In relation to company law, advise the creditors, Betabuild and Housing Finance Bank. (5 marks)
(b) The liquidation process in respect of Wiseacre has now commenced. The liquidator receives
two lawsuits filed against Wiseacre by creditors Betabuild and Housing Finance Bank. Tirong
Labour Brokers attach property belonging to Wiseacre with a view to selling it to recover their
P50,000. Several shareholders of Wiseacre have sold their shares. The liquidator has asked you
to advise him on the propriety of the actions of the creditors and shareholders.
Required:
In relation to company law, advise the liquidator. (5 marks)
Suggested Solution.
(a) This question requires candidates to explain the basis for a compulsory liquidation.
An application for the compulsory winding up of a company may be made in court if a company
is unable to pay its debts s.369(b) Companies Act, 2003. Section 368(c) Companies Act provides
that a company shall be deemed unable to pay its debts if it is proved, to the satisfaction of the
court, that the company is unable to pay its debts. In determining whether the company is
unable to pay its debts, the court shall take into account the contingent and prospective
liabilities of the company. In Rosenbach & Co (Pty) Ltd v Singh’s Bazaar (Pty) Ltd (1962), it was
held that a company will be wound up if it is commercially insolvent and that a company would
be regarded as commercially insolvent if it is unable to pay its debts, that is unable to meet the
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constant demands upon its business and its day-to-day liabilities in the ordinary course of the
business.
The creditors are advised that Wiseacre is a suitable company for compulsory liquidation.
Wiseacre is unable to pay its debts. It has several creditors all of whom it is unable to pay. It
owes P50,000 to Tirong Labour Brokers, P3 million to Betabuild and it has difficulty paying its
loan to Housing Finance Bank. Wiseacre cannot meet the constant demands upon its business
and its day-to-day liabilities in the ordinary course of business.
(b) This question requires candidates to explain some elements of the procedure involved in
compulsory liquidation. Once the winding up process has commenced, all actions or
proceedings against the company are stayed and cannot be commenced except by leave of the
court – s.376(i) Companies Act, 2003. In view of this section, the liquidator is advised that the
actions brought by Betabuild and Housing Finance Bank against Wiseacre are unsustainable.
Once the winding up has commenced, any attachment or execution put in force against the
assets of the company after the commencement of proceedings is void – s.376(ii) Companies
Act, 2003. Therefore, the liquidator is advised that the attachment of Wiseacre properties by
Tirong Brokers is void. Once the liquidation has commenced, every disposition of the company’s
property and every transfer of shares or alteration in the status of its members is void unless
the court orders otherwise – s.376(iii) Companies Act. Therefore, the liquidator is advised that
the sale of shares by Wiseacre shareholders is void unless the court orders otherwise.
Question 1
How does a shareholders voluntary liquidation contrast with creditors voluntary liquidation?
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Faculty Faculty of Business and Accounting

Module Name Company Law

Company Law cover page............................................................................................................................0

Legal personality and piercing of corporate veil

 Compare a company with (a) partnership and (b) an unincorporated association.

Prescribed Material for this Unit

3. Companies Act: section 20(9) o Close Corporations Act: section 65

2.1 Characteristics of a company

2.2 Limited liability

2.3 Legal personality and its implications (ss 24)

The consequence of incorporation is that a ‘veil of incorporation’ is created. Veil of

2.3.1 Legal personality of branches and divisions

3. Lifting of corporate veil

3.1 Lifting of corporate veil through courts or common law

 Tax evasion: Apthorpe v Peter Schoenhofen Brewing Co Ltd (1899), 41.

 Prevention of fraud or improper conduct: Jones v Lipman (1962), 442,

 Fraud/sham or facade: Gilford Motor Co v Horne [1933] Ch 935 (CA).

3.2 Lifting by statutes

 ss 160: Wrongful trading

 ss 481: Fraudulent trading

 ss 502: Where a director is prohibited or disqualified to manage the company

3.3 A test to lift or upheld corporate veil principle

A factual investigation must be conducted in each case to decide whether it would be

4.0 Other forms of business in Botswana

 Common law trust

 Societies, being associations of persons

History and administration of company law in Botswana

On successful completion of the unit you should be able to:

 Outline the sources of Company Law in Botswana

 State the object of the Companies Act

In an examination you may be required to:

(i) Identify the sources of company law in Botswana

(ii) Explain the object of the Companies Act of 2003

Prescribed Material for this Unit

 Chapters 1: Quansah, E. K, Introduction to the Botswana legal system, Gaborone : E.

 National Assembly of Botswana Hansard number 143, part 5,Nov-Dec 2003

2. Background of the Botswana’s legal system

2. Sources of Botswana Law

2.1 Common Law

2.3 Customary Law

Prior to the establishment of the Bechuanaland Protectorate there existed a variety of

3. 0 Interpretation and citing of Botswana Statutes

4.0 Sources of Botswana Company law

5.0 The new Companies Act 2003

 To enable a country to more competitively respond to challenges and opportunities in a

 Improving services and encouraging liberalization in the registration of companies.

Outline the major changes to the 2003 Companies Act

Prescribed Material for this Unit

2. Classification of commercial companies (ss 19)

2.1 Companies limited by shares

2.2 Differences on minimum requirements and other

Nature of Organization Minimum number Other requirements

Proprietary Limited Companies 1 Director Should have a Secretary and

Public Limited Companies 2 Directors registered office.

2.3 Exempt private company

2.4 Close Company (ss 248-276)

2.5 Company Limited by Guarantee

Incorparation of companies and constitutions

Prescribed Material for this Unit