[MODULE

LBUE3704 CODE]
(Second semester)

LAW [MODULE NAME]

OF BUSINESS ENTITIES

[NQF
NQF level]
level 7

[Number of credits]
16 credits

[Name of of
Department department]
Mercantile Law

Compiled
Compiledbyby

Prof [Name of lecturer]

E Snyman-Van Deventer

Updated
2024by

[Name of lecturer]

[YEAR]
 “It always seems impossible until it’s done” Pres Mandela

TABLE OF CONTENTS
1. Welcome ....................................................................................................................... 7
2. Module objective .......................................................................................................... 8
3. Module outcomes ........................................................................................................ 8
4. Learning units .............................................................................................................. 9
5. Credits and notional learning hours ......................................................................... 10
6. Study material ............................................................................................................ 10
7. Assessment ................................................................................................................ 10
7.1 Assessment plan ................................................................................................. 10
7.2 Passing the module............................................................................................. 10
8. Updating of module information and resources ...................................................... 11
9. Action words for assessment ................................................................................... 11
10. Assessment ................................................................................................................ 13
10.1. Assessment Breakdown.............................................................................. 13
10.2. Assessment Calender ................................................................................. 13
10.3. Calculation of the Final Mark ...................................................................... 14
10.4. Passing the Module ..................................................................................... 14
11. Updating of Module Information and Resources ..................................................... 14
12. Student Graduate Attributes ..................................................................................... 14
Learning Unit 1: Introduction to the Companies Act 2008 ............................................. 19
Unit overview ............................................................................................................. 19
Learning unit notional hours ..................................................................................... 19
Learning outcomes .................................................................................................... 19
Content material......................................................................................................... 20
Action words, terms and concepts ........................................................................... 21
Preparation Material .................................................................................................. 22
Learning and Assessment Activities ........................................................................ 22
Learning Unit 2: Legal personality, categories of companies and formation of
companies ......................................................................................................................... 24
.................................................................................................................................... 24
Unit Overview ............................................................................................................. 24
Learning unit notional hours ..................................................................................... 24
Learning outcomes .................................................................................................... 24
Content material......................................................................................................... 25
Action words, terms and concepts ........................................................................... 26

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 “True education is about getting the best out of oneself” Mahatma Gandhi

Preparation Material .................................................................................................. 28

Learning and Assessment Activities ........................................................................ 28
Learning Unit 3: Corporate finances: shares; debt and payments ................................ 29
.................................................................................................................................... 29
Unit Overview ............................................................................................................. 29
Learning unit notional hours ..................................................................................... 30
Learning outcomes .................................................................................................... 30
Preparation Material .................................................................................................. 30
Learning and Assessment Activities ........................................................................ 31
Content material......................................................................................................... 31
Action words, terms and concepts ........................................................................... 31
Learning Unit 4: Corporate governance and representation ......................................... 34
Unit Overview ............................................................................................................. 34
Learning unit notional hours ..................................................................................... 34
Learning outcomes .................................................................................................... 34
Content material......................................................................................................... 35
Action words, terms and concepts ........................................................................... 35
Preparation Material .................................................................................................. 36
Learning and Assessment Activities ........................................................................ 36
Learning Unit 5: Corporate governance: Shareholders ................................................. 37
Unit Overview ............................................................................................................. 37
Learning unit notional hours ..................................................................................... 37
Learning outcomes .................................................................................................... 37
Content material......................................................................................................... 38
Action words, terms and concepts ........................................................................... 39
Preparation Material .................................................................................................. 39
Learning and Assessment Activities ........................................................................ 40
Learning Unit 6: Corporate governance: Directors ........................................................ 41
Unit Overview ............................................................................................................. 41
Learning unit notional hours ..................................................................................... 41
Learning outcomes .................................................................................................... 41
Content material......................................................................................................... 43
Action words, terms and concepts ........................................................................... 44
Preparation Material .................................................................................................. 45
Learning and Assessment Activities ........................................................................ 45
Learning Unit 7: Enhanced accountability and transparency ........................................ 46
 “It always seems impossible until it’s done” Pres Mandela

Learning outcomes .................................................................................................... 46

Content material......................................................................................................... 47
Action words, terms and concepts ........................................................................... 47
Preparation Material .................................................................................................. 48
Learning and Assessment Activities ........................................................................ 48
Learning Unit 8: Accounting records, financial statements and audit .......................... 49
Learning outcomes .................................................................................................... 49
Content material......................................................................................................... 50
Action words, terms and concepts ........................................................................... 51
Preparation Material .................................................................................................. 51
Learning and Assessment Activities ........................................................................ 52
Learning Unit 9: Remedies and enforcement.................................................................. 53
Learning unit notional hours ..................................................................................... 53
Learning outcomes .................................................................................................... 53
Content material......................................................................................................... 54
Action words, terms and concepts ........................................................................... 55
Class Notes ................................................................................................................ 56
Preparation Material .................................................................................................. 59
Learning and Assessment Activities ........................................................................ 59
Learning Unit 10: BEE and companies ............................................................................ 60
Learning unit notional hours ..................................................................................... 60
Learning outcomes .................................................................................................... 60
Content material......................................................................................................... 60
Action words, terms and concepts ........................................................................... 61
Preparation Material .................................................................................................. 61
Learning and Assessment Activities ........................................................................ 61

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 “True education is about getting the best out of oneself” Mahatma Gandhi

Table 1: Icon Library

Icon Description

Welcome message

Module objective

Module outcomes

Action words, terms and concepts that need to be understood

Activities and resources made available on Blackboard

Prerequisites of the module

Credits and notional hours relevant to the module

“It always seems impossible until it’s done” Pres Mandela

Indicates face-to-face contact sessions

Indicates an activity to be completed on your own (preparation). You

may still ask your tutor or lecturer for feedback when you encounter
aspects that you have difficulty with.

A quiz – usually made available for self-assessment on Blackboard

Unit specific content for the module

The resources to be consulted (such as the textbook, additional

reading material etc)

The roadmap that contextualises (puts into perspective) the different

pieces of information in the module

An indication of an important reminder/cautionary from your lecturer

that requires your attention.

Assessment questions and opportunities

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“True education is about getting the best out of oneself” Mahatma Gandhi

Unit specific assessment criteria

Indicates a learning unit

Learning unit outcomes for a specific unit

Purpose of the learning unit

 “It always seems impossible until it’s done” Pres Mandela

1. WELCOME

Dear student,

Welcome to the second semester of LBUE3704.

Students, please attend class and prepare for class. I know that coming to campus and
attending lectures also poses certain problem, but we will deal with it together. If you have any
problems or questions, please talk to me before or after class or during my office hours or e-
mail me as soon as possible at [email protected]

Law of Business Entities builds on your knowledge of the law of obligations. Most of the
different forms of business enterprises have the contract as an element. Therefore, you need
to make sure that you are conversant with the general principles of the law of contract. The
law of delict is also applicable in respect of delictual liability. The constitutional law is also
important for the law of business enterprises in the light of the Constitution of South Africa
1996 being applicable to all business entities in South Africa.

The Law of Business Entities deals with the different types of enterprises that the
businessperson, either in the formal or informal sector, can utilise to do business. The
entrepreneur has the choice between the sole proprietorship, the partnership, the close
corporation, the company and the business trust. We shall deal with the basic principles of
company law this semester.

You will be introduced to the basic principles and concepts of the Law of Business Entities
(Company Law) as well as the practical implication thereof and with reference to law reform
and the constitutional impact.

In this module we will deal primarily with the provisions of the Companies Act 2008 but some
principles of our common law (mostly found in decided cases of our courts) are also discussed
as they will continue to apply in so far as they are not repealed by the 2008 Act. The 2008 Act
is not a complete codification of our company law. It will also be necessary to sometimes refer
to provisions of the 1973 Act to help you understand the provisions of the 2008 Act.

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 “True education is about getting the best out of oneself” Mahatma Gandhi

When you start working on a learning unit, start by first reading the outcomes or study
objectives and then the prescribed part of your textbook to give you an overview of the work
we are going to do. Focus on the power point presentations as I have summarised the work
in the presentations. Use the power point slides as your point of departure when you start
studying. Read you study guide especially if there are any notes on the learning unit and then
read the additional prescribed material and other materials on Blackboard. Make sure that you
have mastered all the outcomes. You must also go to Blackboard every week as additional
study material, activities and assignments will be available.

It is your responsibility to ensure that you receive all the information for this module. This
information is made available during formal lectures and lecture recordings, on Blackboard,
on the notice boards of the Faculty of Law, and in the Faculty of Law Rulebook. Attendance
of all formal classes is compulsory. Please note that only registered students may attend the
contact sessions for this module.

2. MODULE OBJECTIVE

The module currently forms part of the BComm and LLB and is taken most often in the third
year of study. The purpose of LBUE3704 is to make you familiar with the core principles of
company law. To achieve this purpose, use is made of audio lecturers, audio-visual media,
textbooks, casebooks, discussion of court decisions, articles, self-study and other
assignments.

3. MODULE OUTCOMES

Description and purpose of module: You will be introduced to the basic principles and concepts
of the Law of Business Entities (Company Law) as well as the practical implication thereof and
with reference to law reform and the constitutional impact. You will learn to integrate these
basic concepts and principles with established legal skills.

After successful completion of this module, you will have obtained knowledge of the basic
concepts and principles of the law of business entities, with reference to:
 “It always seems impossible until it’s done” Pres Mandela

 The company legal concept and business form.

 Formation of a company.
 Internal relations (including shareholders, directors, management, etc.) in companies.
 External relations in companies.
 Dissolution and deregistration of a company.
 Development of company law.

4. LEARNING UNITS

In addressing the module outcomes above, the module covers the following learning units:

Learning Unit 1: Introduction to the Companies Act, 2008

Learning Unit 2: Legal personality, categories of companies and formation of

companies

Learning Unit 3: Corporate finances: shares, acknowledgments of debt, and

payments

Learning Unit 4: Corporate governance: Capacity and representation

Learning Unit 5: Corporate governance: Shareholders

Learning Unit 6: Corporate governance: Directors

Learning Unit 7: Enhanced accountability and transparency

Learning Unit 8: Accounting records, financial statements and audit

Learning Unit 9: Remedies and enforcement

Learning Unit 10: BEE and companies

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 “True education is about getting the best out of oneself” Mahatma Gandhi

5. CREDITS AND NOTIONAL LEARNING HOURS

Notional learning hours indicate the amount of learning time taken by the average student to
achieve the specified learning outcomes of a module or the learning programme. It includes
all learning relevant to achievement of the learning outcomes e.g. directed study, essential
practical work, group work, private study, preparation and assessment.

The module has 16 credits, which implies that 16x10 (160) notional learning hours of learning
are expected from students.

6. STUDY MATERIAL

 The prescribed textbook in this module is Davis et al Companies and other business
structures in South Africa Oxford Press 5th edition.
 In addition to the textbook, additional study material will be used to support teaching
and learning in this module. This material will be available on Blackboard throughout
the semester. It is your responsibility to ensure that you receive all reading material for
this module in time and study it.
 Most important is the PowerPoint slides. The slides are on Blackboard. Use it to prepare
for class and during the lecture use it to take notes.
 We also focus on case law. You must read the prescribed case law and the journal
articles as indicated in the study guide. The case law and journal articles will help you
understand the work better.

7. ASSESSMENT

7.1 ASSESSMENT PLAN

All information regarding assessment will be made available on Blackboard.

7.2 PASSING THE MODULE

 “It always seems impossible until it’s done” Pres Mandela

A student should obtain a final mark of 50 % or more in order to pass this module.

8. UPDATING OF MODULE INFORMATION AND RESOURCES

The lecturer can at any time update or modify the module schedule and learning unit content
in writing on Blackboard. It is the responsibility of students enrolled in this module to stay up-
to-date with the schedule and curriculum. Relevant announcements will be made via
Blackboard communication. It is recommended that students check Blackboard daily to keep
up to date with developments in this module.

9. ACTION WORDS FOR ASSESSMENT

In order to help the lecturer assess a student’s specific level of knowledge and to help the
student to understand the questions, the following list explains what is meant by the specific
verbs used in the questions. The number in brackets indicates the level of cognitive ability
required to answer the question.

 Abstract (3) Find the core of information and formulate it in your own words.
Concrete examples are not provided.
 Analyse (3) Separate (divide) into two parts or elements, describe
comprehensively and make comment. Find the core of information and
formulate it in your own words. Concrete examples are not provided.
 Apply (3) Show the application of acquired knowledge or given information in
practice or in relation to what is asked. Use the knowledge to reach an answer
to the question.
 Calculate (3) Use the information given to reach a sensible and acceptable
answer/result.
 Classify (1) Arrange information in categories.
 Comment (1) Give your opinion regarding subject matter and illustrate it
through examples. Interpret and evaluate.
 Contrast (2) Emphasise the differences, contrasts and anomalies of facts or
events by using analysis, discussion, and examples.
 Correct (1) Identify and remedy mistakes, identify false statements and correct
them.
 Criticise (3) Judge the credibility of given fact or viewpoints and discuss the
positive and negative elements of a statement, by giving and motivating your
own opinion.

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 Define (1) Give a clear, systematic and authoritative explanation (description of

concepts to reflect the precise meaning thereof.
 Demonstrate (3) Explain by using a sketch, model, picture, graph or a concrete
subject. It may also imply a well thought-out and well-formulated description.
 Derive (2) Form an opinion from above-mentioned or given information.
 Describe (1) Write the basic facts/results down in a logical, systematic and well-
structured manner.
 Design (4) Create and plan. Portray by means of illustrations or concrete
artefacts. Create a model with a specific object in mind as well as indicate the
planning phase.
 Determine (2) Calculate, compare and make comments.
 Determine (2) Prove, make a diagnosis by using facts and commentary
information.
 Discuss (3) Analyse the matter carefully by discussing different aspects in
logical arguments. Compare, contrast and debate.
 Distinguish (1) Show the difference; give the distinguishing characteristics.
 Evaluate (4) Make a value assessment based on specific points of reference or
criteria and give your own opinion. Do not describe. Personal viewpoints may
be given.
 Execute (3) The same as “apply”.
 Explain (2) Give a clear explanation (exposition). Elucidate by means of
examples and/or illustrations and give reasons for pronouncements or results.
 Give a summary/review (1) Give a synopsis (summary, brief account) of the
main facts of a subject and make comments.
 Give an explanation (1) Make a summary of the main facts of a subject in clear,
logical sequence so that differences, similarities and points of reference are
clearly indicated.
 Give an outline (1) Give a framework consisting of main facts and relevant
information in support of these facts. It is not necessary to write down a detailed
discussion.
 Handle (3) Scrutinise (study, consider) the subject from different viewpoints and
provide a critical explanation thereof.
 Identify (1) Reproduce the essential characteristics (main facts).
 Illustrate (2) Use a sketch, diagram, graph or concrete item to explain a concept
or solve a problem. It can also mean to give examples in well-chosen,
descriptive words.
 Interpret (3) Comment on available facts, with reference to applicable
examples. Give a clear indication of own interpretation.
 Investigate (2) Analyse the facts (divide into sections) and write a critical
discussion.
 Judge (3) Give a critical evaluation of the subject.
 Map (2) Provide a graphical representation (graph, flow diagram, map, etc.)
 Modify (1) Change, re-arrange and modify the given information.
 Motivate (2) Prove, give reasons, activate, and comment.
 Name (1) Make short notes of the required information, but do not discuss it in
detail.
 Paraphrase (1) The same as “define”. The student’s own words may be used.
 Plan (4) Explain, compare, determine and make comments.
 Process (2) Rewrite to reach the desired answer, summarise, elaborate and
revise.
 Propose (1) Give a relevant answer/recommendation, indicate, portray.
 Prove (3) Prove the facts in a logical resume of acceptable and relevant
reasons.
 “It always seems impossible until it’s done” Pres Mandela

 Re-arrange (1) Re-divide into new/different classes, groups, types,

characteristics.
 Sketch (2) Give a brief resume of main features, (of the development, progress
of events) logically divided into main facts and sub-sections.
 Solve (3) Explain and prepare well thought-out answers/ recommendations.
 Specific words added to “explanation” can lead to different interpretations of
the question, for example “Give a comprehensive/
critical/evaluating/brief/summarising explanation.
 Summarise/Give a summary (1) Give a resume of the most important facts
without detail, illustrations, critical analysis or discussion.
 To show relations (3) Show by using analysis, discussion and examples how
different facts are interrelated, or correspond to one another.
 Use (1) Make use of information or subjects supplied to illustrate/explain a
specific viewpoint.
 Write a composition (1) Supply the information in a logical and well-structured
manner.
 Write notes on (1) Comment in short explanation (clarification) on a given
subject.

10. ASSESSMENT

10.1. ASSESSMENT BREAKDOWN

Your module mark / final mark will be calculated as follows:

ASSESSMENT TYPE (E.G. TEST, QUIZ, ASSIGNMENT, ORAL, CONTRIBUTION TO

BLACKBOARD ACTIVITY) MODULE MARK
Assessment 4 On campus test 25 of the semester
(÷2 for year mark)
Assessment 5 On campus test 25 (÷2 for year mark)
Assessment 6 Assignment 50 (÷2 for year mark)
LBUE3704: the marks for the first semester will count 50% of your final mark; second
semester will count as the other 50% of your final mark.

10.2. ASSESSMENT CALENDER

Please consult the assessment calendar of the Faculty of Law for the dates of assessments.
The assessment calendar will be available on Blackboard at the commencement of the
semester.

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Please refer to the Faculty of Law Undergraduate Assessment Rules and Regulations that is
available on Blackboard and ensure that you are familiar with the contents thereof.

10.3. CALCULATION OF THE FINAL MARK

This module is assessed by way of formative and summative assessment, the average mark
of all the assessment opportunities will count towards your year mark and the final examination
will count 50% of your final mark.

10.4. PASSING THE MODULE

To pass, a student should have taken part in all the assessment opportunities and obtain an
average of 50% for the year mark and the examiation.

11. UPDATING OF MODULE INFORMATION AND RESOURCES

The module schedule and learning unit content, either orally or in writing, can be updated or
modified at any time by the lecturer. It is the responsibility of students enrolled in this module
to stay up to date with the schedule and curriculum. An announcement of this type can be
given in face-to-face class sessions or communicated on Blackboard. It is recommended that
students check Blackboard weekly to keep up to date with the latest developments in this
module. Any work discussed during contact sessions can be used for assessment purposes.

12. STUDENT GRADUATE ATTRIBUTES

Graduate attributes may be broadly defined as the qualities, competencies and

understandings of a graduate which a university community agrees students should develop
during their time at the institution, both for their future professions and to contribute as ordinary
citizens.

These attributes include but go beyond the disciplinary expertise or technical knowledge that
has traditionally formed the core of most university courses. They are qualities that also
 “It always seems impossible until it’s done” Pres Mandela

prepare graduates as agents of social good and for personal development in view of an
unknown future.

The eight student graduate attributes identified by the UFS that will be developed during the
course of a student’s undergraduate studies, are the following:

The 8 Graduate Attributes:

Academic competence is a graduate attribute embedded in all assessments and refers to

the knowledge, skills and attitudes that students develop through their interaction with
discipline specific content. Critical to academic competence is lifelong learning, which is an all
purposeful learning activity, undertaken on an ongoing basis with the aim of improving
knowledge, skills and competence. Lifelong learners are curios, take initiative, learn
independently, transfer knowledge, and reflect on their learning.

Academic competence for the LLB learner means that the learner has a comprehensive
and sound knowledge and understanding of the South African Constitution and basic areas or
fields of law. This relates to the body of South African law and the South African legal system,
its values and historical background. The learner can demonstrate an integrated
understanding of legal principles, concepts, theories and values, also in relation to societal
issues. The graduate has knowledge and understanding of:
(a) the dynamic nature of law and its relationship with relevant contexts such as political,
economic, commercial, social and cultural contexts;
(b) a discipline other than law and law’s relationship to other disciplines; and
(c) select areas of the law.

Critical thinking is a habit of mind characterized by the comprehensive exploration of issues,

ideas, artifacts, and events before accepting or formulating an opinion or conclusion.

Critical thinking for the LLB learner means that the learner can demonstrate the ability to
research, analyse and evaluate information from a legal perspective. The learner is able to:
(a) recognise and reflect on the role, place and limitations of law in South African society and
beyond;
(b) analyse a text and/or scenario to find the key issues, i.e., distinguish between relevant and
irrelevant information and distinguish between legal and non-legal issues;
(c) identify and address the issues presented in a text or scenario; and
(d) make judgments on the merits of particular arguments and make and present reasoned
choices between alternative solutions.

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Problem solving is the process of designing, evaluating and implementing a strategy to

answer an open-ended question or achieve a desired goal.

Problem solving for the LLB learner means that the learner is able to:
(a) find, select, organise, use, analyse, synthesise and evaluate a variety of relevant
information sources;
(b) determine the relative authority of relevant information sources;
(c) present and make a reasoned choice between alternative solutions;
(d) use techniques of legal reasoning, methodology and argumentation to reach a plausible
conclusion; and
(e) demonstrate academic integrity in research.

Communication comprises of oral as well as written communication.

Oral communication is a prepared, purposeful presentation designed to increase

knowledge, to foster understanding, оr to promote change in the listeners' attitudes, values,
beliefs or behaviours.

Written communication is the development and expression of ideas in writing. Written

communication involves learning to work in many genres and styles. It can involve working
with many different writing technologies, and mixing texts, data, and images. Written
communication abilities develop through iterative experiences across the curriculum.

Communication as an attribute of the LLB learner means that the learner is proficient in
reading, writing, comprehension and speaking and is therefore able to:
(a) communicate effectively by choosing appropriate means of communication for a variety of
contexts;
(b) demonstrate effective oral, written, listening and non-verbal communication skills;
(c) apply communication skills to relevant situations and genres; and
(d) engage with diverse audiences.

Ethical reasoning is reasoning about right and wrong human conduct. It requires students to
be able to assess their own ethical values and the social context of problems, recognize ethical
issues in a variety of settings, think about how different ethical perspectives might be applied
to ethical dilemmas and consider the ramifications of alternative actions. Students’ ethical self-
identity evolves as they practice ethical decision-making skills and learn how to describe and
analyze positions on ethical issues.

Ethical reasoning as an attribute of the LLB learner means that the learner can solve
complex and diverse legal problems creatively, critically, ethically and innovatively.
 “It always seems impossible until it’s done” Pres Mandela

The LLB learner has knowledge of relevant ethical considerations in law and is able to conduct
her/himself ethically and with integrity in her/his relations within the university and beyond,
with clients, the courts, other lawyers and members of the public.

Community engagement is continuous negotiated collaborations and partnerships between

the UFS and/or its members and the interest groups that it interacts with, aimed at building
and exchanging the knowledge, skills, expertise and resources required to develop and
sustain society.

Community engagement as an attribute of the LLB learner means that the learner has
skills and knowledge to understand the responsibilities of the legal professional in service to
the community. In doing so, the learner is able to recognize, reflect and apply social justice
imperatives in acknowledging the capacity, agency and accountability of the legal professional
in shaping and transforming the legal system and promote social justice.

Entrepreneurial mindset is a set of attitudes, skills and behaviours that can be applied in all
spheres of life. This mindset enables citizens to nurture their personal development, to actively
contribute to social development, to enter the job market as employee or as self-employed,
and to start-up or scale-up ventures which may have a cultural, social or commercial motive.

Entrepreneurial mindset as an attribute of the LLB learner means that the learner is able
to:
(a) function effectively in independent and collaborative settings;
(b) recognise opportunities, be creative and innovative, be future-orientated, comfortable with
risk-taking, take initiative, be self-reliant, flexible and adaptable.

Assessment of Graduate Attributes

Academic competence will form the foundation of all assessments throughout the LLB
programme in terms of which one or more of the other attributes will also be assessed to
establish the attainment thereof. It is a priority of the Faculty of Law of the UFS to develop all
eight of the identified student graduate attributes in all the modules presented throughout the
course. However, the assessment to establish the attainment thereof might only be performed
in specific identified modules on different levels, depending on the moment within which it falls
during the academic programme.

Graduate attribute developed Learning units

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Critical thinking LU 1; LU 2; LU 3; LU 4; LU
5; LU 6; LU 7; LU 8; LU 9;
LU 10; Assignments 1 and 2
Academic Problem solving LU 4; LU 5; LU 6; LU 9;
competence Assignments 1 and 2

Written communication Assignments 1 and 2

Entrepreneurial mindset The module in total is

focused on development of
business knowledge and
skills.

Ethical reasoning LU 5; LU 6; LU 7; LU 8
 “It always seems impossible until it’s done” Pres Mandela

LEARNING UNIT 1: INTRODUCTION TO THE COMPANIES ACT

2008

UNIT OVERVIEW

The legislative reform process began in 2005 and was guided by the policy document of the
dti “South African Company Law for the 21 st Century: Guidelines. A draft Companies
Amendment Bill was published in the Government Gazette in Sept 2018 for comments. In this
unit we are focusing on the historic development of the South African company law and we
are evaluating the reform process. We will also investigate the main issues pertaining to the
2008 Act that will serve as background and foundation for the rest of this modules. The nexus
between the Companies Act, the Constitution and human rights are emphasised and you
should keep this in mind as we continue with the rest of the semester.

LEARNING UNIT NOTIONAL HOURS

It will take the average student about 15 hours to master the contents of this learning unit.

LEARNING OUTCOMES

Once you have completed this learning unit, you should be able to:

1. provide a brief overview of the history of the South African company law;

2. explain the historical development of the Companies Act of 2008;

3. list and explain the shareholder/stakeholder approaches/models;

4. briefly discuss the enlightened shareholder approach;

5. identify and discuss the key objectives as agreed upon with NEDLAC;

6. discuss the purpose of the Companies Act of 2008;

7. summarize the key concepts in the Companies Act of 2008;

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8. explain the interpretation of the Companies Act of 2008;

9. analyse the influence of the common law on the Companies Act of 2008;

10. appraise the application of and relevance of the Constitution on company law;

11. evaluate the role of a company’s responsibility pertaining to human rights;

12. explain the importance of section 7 of the Companies Act; and

13. briefly discuss the statutory bodies (CIPC and the Companies Tribunal) established
in terms of the Companies Act;

14. list the most important changes proposed in the draft Amendment Co Act (Bill) issued
in 2018.

CONTENT MATERIAL

The following material needs to be studied in this learning unit:

Read:

1. Davis Chapter 1 pp4-17; 20-25.

Study the following:

2. Power point slides on BB;

3. Gwanyanya “The South African Companies Act and the realisation of corporate human
rights” 2015 Potchefstroom Elec LJ 3101;

4. Katzew “Crossing the divide between the business of the corporation and the
imperatives of human rights – the impact of section 7 of the Companies Act 71 of 2008”
2011 SALJ 686;

5. Cassim “The Companies Act 2008: An overview of a few of its core provisions” 2010 SA
Mercantile LJ 157;
 “It always seems impossible until it’s done” Pres Mandela

6. Mongalo “An overview of company law reform in South Africa: From guidelines to the
Companies Act 2008” 2010 Acta Juridica xiii;

7. Mongalo “South Africanizing company law for a modern competitive global economy”
2004 SALJ 93;

8. Van Rooyen "The Role of the Company in Contemporary South Africa & Directors
Duties: The Accelerated Shift." 2021 International In-House Counsel Journal 14(57)
Autumn 7479;

9. Singh v Companies and Intellectual Property Commission 2019 (5) 432 (SCA);

10. Notes on 2018 proposed amendments to the Companies Act 2008 on Blackboard.

ACTION WORDS, TERMS AND CONCEPTS

Glossary:

Common law: __________________________________________________________

______________________________________________________________________

NEDLAC: ______________________________________________________________

______________________________________________________________________

CIPC: _________________________________________________________________

______________________________________________________________________

Companies Tribunal: _____________________________________________________

______________________________________________________________________

Social dialogue: _________________________________________________________

______________________________________________________________________

Enlighten shareholder approach: ____________________________________________

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______________________________________________________________________

Corporative effectiveness: _________________________________________________

______________________________________________________________________

Solvency: ______________________________________________________________

______________________________________________________________________

Liquidity: ______________________________________________________________

______________________________________________________________________

PREPARATION M ATERIAL

Please listen to the pre-recording of the lecture on Blackboard.

LEARNING AND ASSESSMENT ACTIVITIES

You will be assessed on the contents of this learning unit during online test 1. Refer to
Blackboard for more information and announcements on assessment opportunities.
“It always seems impossible until it’s done” Pres Mandela

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LEARNING UNIT 2: LEGAL PERSONALITY, CATEGORIES OF

COMPANIES AND FORMATION OF COMPANIES

UNIT OVERVIEW

The focus of Learning Unit 2 is on the formation of a company. We first will look at the company
as a legal person and the circumstances under which legal personality of the company will be
ignored. In determining the process of formation of a company, we will start with the different
types of companies a business person can choose from and then we will investigate the
naming of a company and all the documentation needed to register a company. The use of
pre-incorporation contracts before the registration of a company is also important in the
process of formation as it makes it possible to conclude contracts on behalf of the company
yet to be formed.

LEARNING UNIT NOTIONAL HOURS

It will take the average student about 15 hours to master the contents of this learning unit.

LEARNING OUTCOMES

Once you have completed this lesson, you should be able to:-

1. discuss why incorporation is necessary;

2. define and discuss the concept of legal entity / persona;

3. discuss and define the concept of corporate veil;

4. discuss a company as a legal entity/persona;

5. identify and discuss types of companies;

6. explain and discuss the process of incorporation of a company;

 “It always seems impossible until it’s done” Pres Mandela

7. discuss the NoI as founding document of a company;

8. discuss the MoI regarding its purpose, content and importance;

9. discuss alterable and unalterable provisions in a MoI;

10. define and discuss pre-incorporation contracts;

11. evaluate the protection in terms of a pre-incorporation contract of the representative

of a company to be formed and of the company after incorporation;

12. set guidelines for the name of a company;

13. explain and discuss how to go about registering a company name;

14. discuss shareholders agreements; and

15. discuss rules in terms of section 15.

CONTENT MATERIAL
‘
Read:

1. Davis Chapter 2 especially pp34-40; 40-49; 49-60 and 61-65; and 60-61;

Study the following:

2. Derby Downs Management Association v Assegaai River Properties (Pty) Ltd 2022 (2)
SA 71 (KZP);

3. Centuar Mining South Africa (Pty) Ltd v Cloete Murray 2023 (1) SA 499 (GT);

4. Ex parte Gore and Others NNO 2013 (3) SA 382 (WCC);

5. ACL Group (Pty) Ltd and Others v Qick Televentures FZE 2013 (1) SA 508 (FB);

6. Sibakhulu Construction (Pty) Ltd v Wedgewood Village Golf Country Estate (Pty) Ltd
(Nedbank Ltd Intervening) 2013 (1) SA 191 (WCC);

7. Venalex (Pty) Ltd v Vigraha Property CC [2015] 2 All SA 645 (KZD);

8. Cassim “Piercing the veil under section 20(9) of the Companies Act 71 of 2008: A new
direction” 2014 SA Mercantile LJ 307;

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9. Cassim “The Companies Act 2008: An overview of a few of its core provisions” 2010 SA
Mercantile LJ 157;

10. Katz “Governance under the Companies Act 71 of 2008: Flexibility is the keyword” 2010
Acta Juridica 248;

11. Morajane “The binding effect of the constitutive documents of the 1973 and 2008
Companies Acts of South Africa” 2010 Potchefstroom Elec LJ 171;

12. Ncube “Pre-incorporation contracts: Statutory reform” 2009 SALJ 255;

13. Barry v Clearwater Estates NPC and Others 2017 (3) SA 364 (SCA).

ACTION WORDS, TERMS AND CONCEPTS

Glossary:

Legal entity / persona: ____________________________________________________

______________________________________________________________________

Natural person: _________________________________________________________

______________________________________________________________________

Association of persons: ___________________________________________________

______________________________________________________________________

Pre-incorporation contracts: _______________________________________________

______________________________________________________________________

Limited liability: _________________________________________________________

______________________________________________________________________

Corporate veil: __________________________________________________________

______________________________________________________________________
 “It always seems impossible until it’s done” Pres Mandela

Public company: ________________________________________________________

______________________________________________________________________

Private company: _______________________________________________________

______________________________________________________________________

Profit company: ________________________________________________________

______________________________________________________________________

Non-profit company: _____________________________________________________

______________________________________________________________________

External company: ______________________________________________________

______________________________________________________________________

Notice of incorporation: ___________________________________________________

______________________________________________________________________

Founding documents: ____________________________________________________

______________________________________________________________________

Shareholders: __________________________________________________________

______________________________________________________________________

Shareholders agreements: ________________________________________________

______________________________________________________________________

Directors: ______________________________________________________________

______________________________________________________________________

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Incorporation of companies: _______________________________________________

______________________________________________________________________

Registration of companies: ________________________________________________

______________________________________________________________________

Registration certificate: ___________________________________________________

______________________________________________________________________

PREPARATION M ATERIAL

Please listen to the pre-recording of the lecture on Blackboard.

LEARNING AND ASSESSMENT ACTIVITIES

You will be assessed on the contents of this learning unit during online test 1. Refer to
Blackboard for more information and announcements on assessment opportunities.
 “It always seems impossible until it’s done” Pres Mandela

LEARNING UNIT 3: CORPORATE FINANCES : SHARES; DEBT

AND PAYMENTS

UNIT OVERVIEW

Learning Unit 3 is about the financing of a company. Finance is critical in just about every
business decision, from planning and budgeting and cash flow management to the capital
structure and how the company control risks and costs. There are two basic ways to finance
a business: i) debt and ii) equity. i) Debt – a loan or line of credit that provides the company a
set amount of money that has to be repaid within a period of time. Most loans are secured by
assets, which means that the lender can take the assets away if the company does not pay.
A loan can also be unsecured, with no specific asset securing the loan. ii) Equity – selling a
part of the company’s business (known as selling an equity stake). In this case, the company
does not usually have to pay back the investment because the new owner of the equity gets
all benefits, voting rights, and cash flow associated with that equity stake. When a business is
just starting, it typically borrows money from banks or other financial institutions, or it brings in
additional individuals or institutions (that is, investors) to share ownership in the business in
order to procure the initial capital it needs to cover the costs of building a new business. When
a business is up and running and managing the everyday financial operations, it may likewise
turn to banks and investors for financing, but it typically relies on its customers for generating
the money needed to finance the business. If the business is profitable and the company saves
some of the money it makes from commercial activity, it may use that money to make new
investments that will further expand its business. There are many different methods
businesses use to acquire the financing they need to fund large projects and to improve their
profitability. The JSE explains a share as follows: A share is literally your share of a company.
Imagine a company worth R100 000. You want to invest in that company, but you don’t have
R100 000 to buy it, or maybe the sellers don’t want to sell all of the company. Buying shares
in that company lets you own some of the company, instead of all of it. To make it possible for
you to buy shares, the current owners of the company would agree to break the company into,
say, 10 000 shares, each worth R10. The value of the company remains at R100 000 (R10
share price x R10 000 shares), but you can now buy one share in the company at R10, or five
shares at R50.

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LEARNING UNIT NOTIONAL HOURS

It will take the average student about 17 hours to master the contents of this learning unit.

LEARNING OUTCOMES

Once you have completed this unit, you must be able to :-

1. understand and discuss the concept of company shares;

2. define a share;

3. identify categories of shares, define and compare;

4. define and discuss the issuing of shares;

5. define and discuss acknowledgments of debt;

6. discuss the concept of capital maintenance;

7. discuss the issuing of shares;

8. discuss options;

9. discuss financial assistance for the purchase of shares;

10. distinguish between the primary and secondary market;

11. explain the requirements for selling of shares on the primary market;

12. explain the requirements for selling of shares on the secondary market;

13. explain liability for untruths in the prospect or written statement;

14. explain the solvency and liquidity test.

PREPARATION M ATERIAL

Please listen to the pre-recording of the lecture on Blackboard.

 “It always seems impossible until it’s done” Pres Mandela

LEARNING AND ASSESSMENT ACTIVITIES

You will be assessed on the contents of this learning unit during online test 2. Refer to
Blackboard for more information and announcements on assessment opportunities.

CONTENT MATERIAL

Read:

1. Davis Chapters 9 and 4;

Study the following:

2. Katz “Governance under the Companies Act 71 of 2008: Flexibility is the keyword” 2010
Acta Juridica 248;

3. Wainer “The new Companies Act: Peculiarities and anomalies” 2009 SALJ 806;

4. CDH Invest NV v Petrotank South Africa (Pty) Ltd 2019 (4) SA 436 (SCA);

5. Reezen Ltd v Excellerate Holdings Ltd 2018 (6) SA 571 (GJ).

ACTION WORDS, TERMS AND CONCEPTS

Glossary:

Share: ___________________________________________________________________

_________________________________________________________________________

Preferential share: __________________________________________________________

_________________________________________________________________________

Cumulative preferential share: _________________________________________________

_________________________________________________________________________

Profit sharing preferential share: ________________________________________________

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_________________________________________________________________________

Preferential rights: __________________________________________________________

_________________________________________________________________________

Transferable preferential shares: _______________________________________________

_________________________________________________________________________

Ordinary shares: ____________________________________________________________

_________________________________________________________________________

Delayed / postponed shares: __________________________________________________

_________________________________________________________________________

Share capital: ______________________________________________________________

_________________________________________________________________________

Acknowledgment of debt: _____________________________________________________

_________________________________________________________________________

Capital maintenance: ________________________________________________________

_________________________________________________________________________

Solvency: _________________________________________________________________

_________________________________________________________________________

Liquidity: __________________________________________________________________

_________________________________________________________________________

Securities: ________________________________________________________________

_________________________________________________________________________
 “It always seems impossible until it’s done” Pres Mandela

Issuing / Issue: _____________________________________________________________

_________________________________________________________________________

Options: __________________________________________________________________

_________________________________________________________________________

Financial assistance: ________________________________________________________

_________________________________________________________________________

Primary market: ____________________________________________________________

_________________________________________________________________________

Secondary market: __________________________________________________________

_________________________________________________________________________

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LEARNING UNIT 4: CORPORATE GOVERNANCE AND

REPRESENTATION

UNIT OVERVIEW

Learning Unit 4 deals with the representation of a company. It is about the question when will
a company be bound by a contract concluded in its name or on its behalf? A company as a
legal person can conclude contracts in its own name, but a company cannot perform the
physical act or conduct to sign the contract or do the negotiations. Human functionaries are
needed to perform these actions. The corporate functions must of necessity be performed by
human functionaries such as directors and agents especially in transactions with third parties
outside the company. In common law if a company has the necessary capacity and powers to
perform a particular juristic act, and the company representative has the necessary authority
to bind the company, the company will be bound by the contract concluded by the agent. We
will also investigate the application of the common law doctrines in terms of the Companies
Act (Turquand Rule; constructive notice and ultra vires).

LEARNING UNIT NOTIONAL HOURS

It will take the average student about 15 hours to master the contents of this learning unit.

LEARNING OUTCOMES

Once you have completed this unit, you must be able to:-

1. explain the capacity of a company as a juristic person;

2. explain the working of the doctrine of constructive notice in terms of the new Companies
Act 2008;
 “It always seems impossible until it’s done” Pres Mandela

3. indicate the difference in the application of the doctrine of constructive notice between the
Companies Act 1973 and the Companies Act 2008;

4. discuss the validity of an ultra vires act;

5. discuss representation of the company in detail;

6. discuss the working and application of the Turquand rule;

7. explain when a contract will be binding on a company.

CONTENT MATERIAL

The following material needs to be studied in this learning unit:

Read:

1. Davis Chapter 2 (2.12 pp 65-68)

2. Sections 19 and 20 of the Companies Act, 2008;

Study the following:

3. Super Group Trading (Pty) Ltd t/a Super Rent v Bauers 2022 (5) SA 622 (WCC);

4. One Stop Financial Services (Pty) Ltd v Neffensaan Ontwikkelings (Pty) Ltd and
Another 2015 (4) SA 623 (WCC);

5. Jooste “Observations on the impact of the 2008 Companies Act on the doctrine of
constructive notice and the Turquand Rule” 2013 SALJ 464;

5. Wainer “The new Companies Act: Peculiarities and anomalies” 2009 SALJ 806.

ACTION WORDS, TERMS AND CONCEPTS

Glossary:

Capacity: _________________________________________________________________

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_________________________________________________________________________

Representation: ____________________________________________________________

_________________________________________________________________________

Doctrine of constructive notice: ________________________________________________

_________________________________________________________________________

Turquand Rule: _____________________________________________________________

_________________________________________________________________________

Ultra vires acts: _____________________________________________________________

_________________________________________________________________________

PREPARATION M ATERIAL

Please listen to the pre-recording of the lecture on Blackboard.

LEARNING AND ASSESSMENT ACTIVITIES

You will be assessed on the contents of this learning unit during online test 2. Refer to
Blackboard for more information and announcements on assessment opportunities.
 “It always seems impossible until it’s done” Pres Mandela

LEARNING UNIT 5: CORPORATE GOVERNANCE:

SHAREHOLDERS

UNIT OVERVIEW

The role of the shareholders in good corporate governance is very important. Shareholders
influence the company and its business through decision-making at meetings. Certain
substantive decisions pertaining to the management of the company is reserved for the
shareholders. In Learning Unit 5 we will look at all aspects of meetings of shareholders.

LEARNING UNIT NOTIONAL HOURS

It will take the average student about 18 hours to master the contents of this learning unit.

LEARNING OUTCOMES

Once you have completed this unit, you must be able to:-

1. explain the record date for determining the rights of shareholders;

2. list the instances where the board of the company may call a meeting of shareholders;

3. list the instances where the board of the company must call a meeting of shareholders;

4. discuss the notice of meetings and the notice period of the shareholders meeting;

5. discuss the postponement and adjournment of meetings;

6. briefly discuss the proxy of a shareholder;

7. briefly discuss the quorum of a meeting;

8. explain how shareholders meetings are conducted;

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9. discuss the majority rule;

10. identify the exceptions to applicable rules and formalities of meetings;

11. discuss shareholders acting other than at a meeting;

12. discuss the compulsory annual general meeting of a company;

13. explain the convening of meetings for special circumstances; and

14. discuss resolutions and the procedure of voting at meetings.

CONTENT MATERIAL

The following material needs to be studied in this learning unit:

Read:

1. Davis 4th ed Chapter 5;

2. Sections 57-66 of the Companies Act, 2008.

Study the following:

3. Barry v Clearwater Estates NPC and Others 2017 (3) SA 364 (SCA);

4. Hlumisa Investment Holdings RF Ltd v Kirkinis 2019 (4) SA 569 (GP);

5. Ex parte Gore and Others NNO 2013 (3) SA 382 (WCC);

6. Communicare and Others v Khan and Another 2013 (4) SA 482 (SCA);

7. Reezen Ltd v Excellerate Holdings Ltd 2018 (6) SA 571 (GJ);

8. Sand Grove Opportunities Master Fund v Distell Group Holdings Ltd 2022(5) SA 277
(WCC);

9. Capital Appreciation Ltd v First National Nominees (Pty) Ltd 2022 (6) SA 67 (SCA).
 “It always seems impossible until it’s done” Pres Mandela

ACTION WORDS, TERMS AND CONCEPTS

Glossary:

Record date: _______________________________________________________________

_________________________________________________________________________

Shareholder: _______________________________________________________________

_________________________________________________________________________

Shareholders rights: _________________________________________________________

_________________________________________________________________________

Shareholders meeting: _______________________________________________________

_________________________________________________________________________

Annual general meeting: _____________________________________________________

_________________________________________________________________________

Quorum of a meeting: _______________________________________________________

_________________________________________________________________________

Resolutions: _______________________________________________________________

_________________________________________________________________________

Special resolution: __________________________________________________________

_________________________________________________________________________

Ordinary resolution: _________________________________________________________

_________________________________________________________________________

PREPARATION M ATERIAL

Please listen to the pre-recording of the lecture on Blackboard.

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 “True education is about getting the best out of oneself” Mahatma Gandhi

LEARNING AND ASSESSMENT ACTIVITIES

You will be assessed on the contents of this learning unit during online test 3. Refer to
Blackboard for more information and announcements on assessment opportunities.
 “It always seems impossible until it’s done” Pres Mandela

LEARNING UNIT 6: CORPORATE GOVERNANCE: DIRECTORS

UNIT OVERVIEW

Directors play a major role in the functioning and management of a company. Higher
standards are continually expected of directors in terms of the Companies Act and the King
Reports and the King Code. It is thus important to identify the directors of a company in order
to determine their accountability in terms of their conduct in managing the affairs and business
of the company. Section 66(1) states that the business and affairs of a company must be
managed by or under the direction of its board of directors, which has the authority to exercise
any of the powers and perform any of the functions of the company, except to the extent that
the Companies Act or the MoI provides otherwise.

LEARNING UNIT NOTIONAL HOURS

It will take the average student about 24 hours to master the contents of this learning unit.

LEARNING OUTCOMES

Once you have completed this unit, you must be able to:-

1. explain the meaning of the word “director;

2. distinguish between the different types of directors;

3. explain related and inter-related persons;

4. explain the composition of the board of directors;

5. distinguish the fundamental differences between managers and directors;

6. discuss the duties and liabilities of directors, with specific reference to the following:

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a. Directors’ personal financial interest;

b. The standards of directors’ conduct

c. The business judgment rule; and

d. Indemnification and director’s insurance.

7. Compare the principles of ubuntu with the fiduciary duties of directors and draw
comparisons (if possible);

8. identify the number of directors that is required for a company;

9. discuss the provisions of the Companies Act that the MoI may vary from company to
company;

10. discuss the circumstances that may lead to a person being disqualified to act as a
director;

11. identify the circumstances when a court has discretion to avoid the disqualification of
a person as a director;

12. discuss the application to declare a person a delinquent or under probation;

13. discuss the application to suspend and set aside order of delinquency;

14. discuss the appointment of the first directors of a company;

15. identify the circumstances that may lead to vacancies on the board;

16. explain the procedure to follow to fill vacancies on the Board;

17. discuss the removal of directors in detail; and

18. explain the board committees and the King 3 proposal on Board committees.
 “It always seems impossible until it’s done” Pres Mandela

CONTENT MATERIAL

The following material needs to be studied in this learning unit:

Read:

1. Davis 4th ed Chapter 6;

2. Sections 66-78 of the Companies Act 2008;

Study the following:

3. De Bruyn v Steinhoff International Holdings NV 2022 (1) SA 442 (GJ);

4. Communicare and Others v Khan and Another 2013 (4) SA 482 (SCA);

5. Gihwala and Others v Grancy Property Ltd and Others 2017 (2) SA 337 (SCA);

6. Kaimowitz v Delahunt and Others 2017 (3) SA 201 (WCC);

7. Lewis Group Ltd v Woollam and Others 2017 (2) SA 547 (WCC);

8. Mthimunye-Bakoro v Petroleum and Oil Corporation of South Africa (SOC) Ltd and
Another 2015 (6) SA 338 (WCC);

9. Steenkamp and Another v Central Energy Fund Soc Ltd and Others 2018 (1) SA 311
(WCC);

10. Visser Sitrus (Pty) Ltd v Goede Hoop Sitrus (Pty) Ltd and Others 2014 (5) SA 179
(WCC);

11. CDH Invest NV v Petrotank South Africa (Pty) Ltd 2019 (4) SA 436 (SCA);

12. Hlumisa Investment Holdings RF Ltd v Kirkinis 2019 (4) SA 569 (GP);

13. Miller v Natmed Defence (Pty) Ltd 2022 (2) SA 554 (GJ);

14. Atlas Park Holdings (Pty) Ltd v Taillifts South Africa (Pty) Ltd 2022 (5) SA 127 (GJ);

15. Cassim “Delinquent directors under the Companies Act 71 of 2008: Gihwala v Grancy
Properties Ltd 2016 ZASCA 35” 2016 Potchefstroom Elec LJ 1;

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16. Ncube “You’re fired! The removal of directors under the Companies Act 71 of 2008”
2010 SALJ 33;

17. Katz “Governance under the Companies Act 71 of 2008: Flexibility is the keyword”
2010 Acta Juridica 248;

18. Wainer “The new Companies Act: Peculiarities and anomalies” 2009 SALJ 806;

19. Van Rooyen "The Role of the Company in Contemporary South Africa & Directors
Duties: The Accelerated Shift." 2021 International In-House Counsel Journal 14(57)
Autumn 7479;

20. Hamadziripi and "A Comparative Analysis of Company Directors' Accountability and the
Statutory Duty of Care, Skill and Diligence in South Africa and Zimbabwe." 2021
Perspectives of Law and Public Administration 10(2) 38.

ACTION WORDS, TERMS AND CONCEPTS

Glossary:

Business judgment rule: __________________________________________________

______________________________________________________________________

Fiduciary relationship: ____________________________________________________

______________________________________________________________________

Indemnification: _________________________________________________________

______________________________________________________________________

Proper purpose: ________________________________________________________

______________________________________________________________________

Declaration of delinquency or probation: ______________________________________

______________________________________________________________________

Standard of conduct: _____________________________________________________

 “It always seems impossible until it’s done” Pres Mandela

______________________________________________________________________

PREPARATION M ATERIAL

Please listen to the pre-recording of the lecture on Blackboard.

LEARNING AND ASSESSMENT ACTIVITIES

You will be assessed on the contents of this learning unit during online test 4 and 5. Refer to
Blackboard for more information and announcements on assessment opportunities.

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LEARNING UNIT 7: ENHANCED ACCOUNTABILITY AND

TRANSPARENCY

Unit Overview

The internal auditor reports to management on internal controls; the external auditors report
to the shareholders on the financial position and financial performance of the company. The
internal auditors provide an assurance function; the external auditors provide an attestation
function. The internal auditors are dependent on management; the external auditors are
independent of management. The external audit plays a critical role in lending independent
credibility to published financial statements. At each annual general meeting a SOC, a public
company or a company that is required to do so by its MoI, must elect an audit committee for
the company. All SOCs and public companies as well as other companies required to do so
by its MoI, must appoint a company secretary. (Notes on South African Companies Act, L
Hefer (ed) Genesis Corporate Services)

Learning unit notional hours

It will take the average student about 13 hours to master the contents of this learning unit.

LEARNING OUTCOMES

Once you have completed this unit, you must be able to:-

1. explain when and how the enhanced accountability and transparency requirements of
the Companies Act, 2008 should be met;

2. discuss the appointment of a company’s auditor;

3. explain the procedure that should be followed if the auditor resigns or if the position
becomes vacant;
 “It always seems impossible until it’s done” Pres Mandela

4. discuss the rotation of auditors;

5. identify the rights and restricted functions of auditors;

6. discuss audit committees; and

7. discuss company secretaries.

CONTENT MATERIAL

The following material needs to be studied in this learning unit:

Read:

1. Davis 4th ed Chapter 13;

Study the following:

2. De Bruyn v Steinhoff International Holdings NV 2022 (1) SA 442 (GJ);

3. Ncube “Transparency and accountability under the new company law” 2010 Acta
Juridica 43;

4. Wainer “The new Companies Act: Peculiarities and anomalies” 2009 SALJ 806.

ACTION WORDS, TERMS AND CONCEPTS

Glossary:

Company secretary: _________________________________________________________

_________________________________________________________________________

Auditor: ___________________________________________________________________

_________________________________________________________________________

Audit committee: ____________________________________________________________

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_________________________________________________________________________

PREPARATION M ATERIAL

Please listen to the pre-recording of the lecture on Blackboard.

LEARNING AND ASSESSMENT ACTIVITIES

You will be assessed on the contents of this learning unit during online test 5. Refer to
Blackboard for more information and announcements on assessment opportunities.
 “It always seems impossible until it’s done” Pres Mandela

LEARNING UNIT 8: ACCOUNTING RECORDS , FINANCIAL

STATEMENTS AND AUDIT

Unit Overview

Section 1 defines accounting records as the information in either written or electronic format
concerning the financial affairs of a company and includes eg record of the company’s assets
and liabilities, purchase and sales records, general and subsidiary ledgers and other books
and documents used in the preparation of the financial statements. Accounting records form
part of the records of a company and all companies must keep accurate and complete
accounting records in one of the official languages of South Africa at its registered offices. The
accounting records must provide an adequate information base sufficient to enable the
company to satisfy all reporting requirements applicable to it and to provide for the compilation
of the financial statements. The financial statements includes annual and consolidated
financial statements as well as interim and preliminary reports etc. The financial statements
presents fairly the state of the affairs an business the company and explains the transactions
and financial position of the business of the company. (Notes on South African Companies
Act, L Hefer (ed) Genesis Corporate Services)

Learning unit notional hours

It will take the average student about 13 hours to master the contents of this learning unit.

LEARNING OUTCOMES

Once you have completed this unit, you must be able to:

1. explain the need for adequate regulation of financial records and reporting

2. identify the factors influencing company records and financial information;

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3. list the records that every company must maintain;

4. explain the duty that every company must have a registered office;

5. briefly explain the financial statements of the company;

6. discuss the reporting standards applicable to different companies;

7. briefly explain the audit and review of the financial statements of the company;

8. briefly discuss the contents of annual financial statements;

9. discuss the effect of the solvency and liquidity test on the financial statements and
records;

10. discuss the annual returns and financial accountability supplements; and

11. explain the contents of the director’s report.

CONTENT MATERIAL

The following material needs to be studied in this learning unit:

Read:

1. Davis 4th ed Chapter 7;

Study the following:

3. Ncube “Transparency and accountability under the new company law” 2010 Acta
Juridica 43;

4. Wainer “The new Companies Act: Peculiarities and anomalies” 2009 SALJ 806.
 “It always seems impossible until it’s done” Pres Mandela

ACTION WORDS, TERMS AND CONCEPTS

Glossary:

Transparency: _____________________________________________________________

_________________________________________________________________________

Accountability: _____________________________________________________________

_________________________________________________________________________

Integrity: __________________________________________________________________

_________________________________________________________________________

Company records: __________________________________________________________

_________________________________________________________________________

Accounting records: _________________________________________________________

_________________________________________________________________________

Financial statements: ________________________________________________________

_________________________________________________________________________

Annual financial statements: ___________________________________________________

_________________________________________________________________________

Annual return: ______________________________________________________________

_________________________________________________________________________

PREPARATION M ATERIAL

Please listen to the pre-recording of the lecture on Blackboard.

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LEARNING AND ASSESSMENT ACTIVITIES

You will be assessed on the contents of this learning unit during online test 6. Refer to
Blackboard for more information and announcements on assessment opportunities.
 “It always seems impossible until it’s done” Pres Mandela

LEARNING UNIT 9: REMEDIES AND ENFORCEMENT

LEARNING UNIT NOTIONAL HOURS

It will take the average student about 15 hours to master the contents of this learning unit.

LEARNING OUTCOMES

Once you have completed this unit, you must be able to:-

1. explain the decriminalising of the Companies Act, 2008;

2. discuss the remedies available against directors who have abused their position;

3. discuss the protection of minority shareholders in terms of the Companies Act 2008;

4. discuss the statutory remedies available for shareholders to protect their own rights
in terms of the following:

(a) Section 163

(b) Section 164

(c) Section 161

5. explain how the rights of shareholders and other stakeholders are protected by
means of the following:

(a) The Companies and Intellectual Property Commission;

(b) The Companies Tribunal; and

(c) Voluntary resolution of disputes

6. analyse the Companies Tribunal’s mandate to uphold the principles enshrined in the
Constitution’s Bill of Rights.

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 “True education is about getting the best out of oneself” Mahatma Gandhi

CONTENT MATERIAL

The following material needs to be studied in this learning unit:

1. Davis 3rd ed Chapter 14;

2. Section 160-164 of the Companies Act, 2008;

3. Grancy Property Ltd v Manala and Others 2015 (3) SA 313 (SCA);

4. Loest v Gendac and Another 2017 (4) SA 187 (GP);

5. De Sousa and Another v Technology Corporate Management (Pty) Ltd and

Others 2016 (6) SA 528 (GJ);

6. De Klerk v Ferreira and Others 2017 (3) SA 502 (GP);

7. Gihwala and Others v Grancy Property Ltd and Others 2017 (2) SA 337 (SCA);

8. Mouritzen v Greystones Enterprises (Pty) Ltd and Another 2012 (5) SA 74 (KZD);

9. Visser Sitrus (Pty) Ltd v Goede Hoop Sitrus (Pty) Ltd and Others 2014 (5) SA 179
(WCC);

10. Lewis Group Ltd v Woollam and Others 2017 (2) SA 547 (WCC);

11. Freedom Stationery (Pty) Ltd v Hassam 2019 (4) SA 459 (SCA);

12. Cilliers v LA Concorde Holdings Ltd 2018 (6) SA 97 (WCC);

13. Hlumisa Investment Holdings RF Ltd v Kirkinis 2019 (4) SA 569 (GP);

14. Larrett v Coega Development Corporation (Pty) Ltd 2019 (3) SA 510 (ECG);

15. Levay v Van Den Heever 2018 (4) SA 473 (GJ);

16. De Bruyn v Steinhoff International Holdings NV 2022 (1) SA 442 (GJ);

17. BNS Nominees (RF) (Pty) Ltd v Arrowhead Properties 2023 (1) SA478 (GJ);

18. Intongo Property Investment (Pty) Ltd) v Groenewald 2022 (2) SA 543 (WCC);

19. Miller v Natmed Defence (Pty) Ltd 2022 (2) SA 554 (GJ);

20. Capital Appreciation Ltd v First National Nominees (Pty) Ltd 2022 (6) SA 67 (SCA);
 “It always seems impossible until it’s done” Pres Mandela

21. Cassim “A critical analysis on the use of the oppression remedy by directors removed
from office by the board of directors under the Companies Act 71 of 2008” 2019 Obiter
154;

22. Beukes “An introduction to the appraisal remedy in the Companies Act 2008: Standing
and the appraisal procedure” 2010 SA Mercantile LJ 176;

23. Stoop “The derivative action provisions in the Companies Act 71 of 2008” 2012 SALJ
527;

24. Phakeng "The Appraisal Right in Terms of Section 164 of the Companies Act 71 of 2008:
An Overview." 2022 Potchefstroom Electronic Law Journal 1.

ACTION WORDS, TERMS AND CONCEPTS

Glossary:

Locus standi: ______________________________________________________________

_________________________________________________________________________

Minority protection: __________________________________________________________

_________________________________________________________________________

Majority rule: _______________________________________________________________

_________________________________________________________________________

Company Tribunal: __________________________________________________________

_________________________________________________________________________

TRP: _____________________________________________________________________

_________________________________________________________________________

Take-over Regulation Panel: __________________________________________________

_________________________________________________________________________

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 “True education is about getting the best out of oneself” Mahatma Gandhi

Derivative action: ___________________________________________________________

_________________________________________________________________________

Reckless trading: ___________________________________________________________

_________________________________________________________________________

Oppressive conduct: _________________________________________________________

_________________________________________________________________________

Prejudicial conduct: _________________________________________________________

_________________________________________________________________________

Abuse of the separate juristic personality: _________________________________________

_________________________________________________________________________

Appraisal remedy: __________________________________________________________

_________________________________________________________________________

CLASS NOTES

Notes on the Companies Tribunal:

https://www.companiestribunal.org.za/about-us/about-the-companies-tribunal/

The Companies Tribunal (the Tribunal) is an agency of the Department of Trade and Industry
(the dti) established in terms of the Companies Act No. 71 of 2008 to provide speedy resolution
of company disputes.

The Tribunal has jurisdiction throughout the Republic of South Africa. It is independent, and
subject to the Constitution and the law. It exercises its functions in accordance with the Act
and performs its functions fairly, without fear, favour or prejudice and in a transparent manner.

https://nationalgovernment.co.za/units/view/390/companies-tribunal
 “It always seems impossible until it’s done” Pres Mandela

The mission of the Companies Tribunal is to adjudicate applications made in terms of the
Companies Act and make orders in respect of such applications; and to provide voluntary
dispute resolution through conciliation, mediation and arbitration.

The Tribunal’s mandate is to: adjudicate in relation to any application that may be made to it
in terms of the Act and make any order provided for in the Act in respect of any such
application; assist in the resolution of disputes; and perform any other function assigned to it
by or in terms of the Act.

file:///C:/Users/snymane/Downloads/Companies-_Tribunal_AR_2018-19.pdf

Through its adjudicative mandate, the Tribunal plays a significant role in upholding and
preserving the principles enshrined in the Constitution’s Bill of Rights. It has a direct impact
on the following areas:

Section 9: Equality: By remaining accessible to diverse groups of individuals and businesses,

the Tribunal ensures that parties have the right to equal protection and benefits of the law.
Additionally, the Tribunal strives, through its value system, to respect human diversity and
ensures non-discrimination.

Section 10: Human dignity: Through the adjudication process, the Tribunal ensures that
prohibited conduct and related action do not impair human dignity.

Section 14: Privacy: While adhering to its founding legislation, and as part of its adjudicative
role, the Tribunal ensures that the privacy of persons is protected.

Section 33: Just administrative action: The Tribunal hears both sides to a dispute and issues
reasons for its decisions.

Section 34: Access to courts: Everyone has the right to have any dispute that can be resolved
by the application of law, decided in a fair public hearing before a court or, where appropriate,
another independent and impartial tribunal or forum.

Section 195: Democratic values and Principles: Public entities must be governed by the
democratic values and principles enshrined in the Constitution, which include:

• High standard of professional ethics

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 “True education is about getting the best out of oneself” Mahatma Gandhi

• Efficient, economic and effective use of resources

• Impartial, fair, equitable, unbiased delivery of services

• Accountability

• Transparency

• Broad representation of South African people, with the need to address the imbalances of
the past

https://www.companiestribunal.org.za/about-us/about-the-companies-tribunal/

The Companies Tribunal adjudicates applications/complaints made in terms of the Companies

Act such as:

1. Company name disputes

2. Directorship disputes

3. Exemption from establishing social and ethics committee

4. Review of compliance notices issued by Companies and Intellectual Property

Commission (CIPC)

5. Extension of time to prepare annual financial statements

6. Extension of time to convene the AGM

7. Review of CIPC decision

https://www.companiestribunal.org.za/adr/

ADR processes comprise of mediation, conciliation and arbitration of all matters that arise in
terms of the Act.

Alternative dispute resolution or the voluntary resolution of disputes refers to conciliation,

mediation or arbitration. A person may refer a matter for resolution by mediation, conciliation
or arbitration as an alternative to going to court. The Tribunal serves as a facilitator in the
resolution of disputes between the parties. The success of ADR process depends on the
 “It always seems impossible until it’s done” Pres Mandela

parties reaching a mutually beneficial agreement. The Tribunal’s services are free. The issue
of costs for either party depends on the agreement by parties.

If in the course of an alternative dispute resolution either party fails to participate in the process
in good faith, or if the Companies Tribunal finds that there is no reasonable probability of the
parties resolving their disputes through that process, then the Companies Tribunal must issue
a certificate in the prescribed form stating that the process has failed. If on the other hand the
dispute resolution is successful, an order may be issued and parties may submit it to court to
be confirmed as a consent order.

MEDIATION

This is a process whereby the parties make presentations before the Tribunal. The Tribunal
does not impose the terms of the settlement however, assist parties to find a commonly
acceptable resolution.

CONCILIATION

This is a process in which the Tribunal impartially facilitate and encourage parties to find a
resolution to the dispute.

ARBITRATION

This is a process where parties make representation before the Tribunal. After the conclusion
of the matter the Tribunal issues an arbitration award that is final and binding. The award can
only be reviewed in the High Court.

PREPARATION M ATERIAL

Please listen to the pre-recording of the lecture on Blackboard.

LEARNING AND ASSESSMENT ACTIVITIES

You will be assessed on the contents of this learning unit during online test 6. Refer to
Blackboard for more information and announcements on assessment opportunities.

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 “True education is about getting the best out of oneself” Mahatma Gandhi

LEARNING UNIT 10: BEE AND COMPANIES

LEARNING UNIT NOTIONAL HOURS

It will take the average student about 15 hours to master the contents of this learning unit.

LEARNING OUTCOMES

Once you have completed this unit, you must be able to:-

1. Define black economic empowerment;

2. explain the influence BEE on the working of a company;

3. explain the advantages and disadvantages of BEE;

4. explain the nexus between corporate social responsibility and black economic
empowerment;

5. explain how BEE works;

6. explain how a generic scorecard works;

7. explain what the different roles and functions of the codes and charters are.

CONTENT MATERIAL

The following material needs to be studied in this learning unit:

1. http://www.dti.gov.za/economic_empowerment/bee.jsp;

2. Warikandwa and Osode “Regulating against business “fronting” in advance Black

Economic Empowerment in Zimbabwe: Lessons from South Africa” 2017 Potchefstroom
Elec LJ 1;
 “It always seems impossible until it’s done” Pres Mandela

3. Kloppers “Driving corporate social responsibility through Black economic empowerment”

2014 Law, Democracy & Development 58;

4. Luiz and Van der Linde “Broad-based black economic empowerment: Some challenges
in measuring ownership of companies” 2006 SA Merc LJ p473 ev.

ACTION WORDS, TERMS AND CONCEPTS

Glossary:

BEE: _____________________________________________________________________

_________________________________________________________________________

Fronting: __________________________________________________________________

_________________________________________________________________________

Corporate social responsibility: _________________________________________________

_________________________________________________________________________

Scorecard: ________________________________________________________________

_________________________________________________________________________

PREPARATION M ATERIAL

Please listen to the pre-recording of the lecture on Blackboard.

LEARNING AND ASSESSMENT ACTIVITIES

You will be assessed on the contents of this learning unit during online test 6. Refer to
Blackboard for more information and announcements on assessment opportunities.

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