Forms of Business Enterprise (FBE2604)

Comprehensive vocabulary flashcards covering the key terms, legal concepts, doctrines, and enterprise types from the Forms of Business Enterprise (FBE2604) module.

Africanisation

Renewing the focus on Africa and ensuring that teaching is adapted to African values, realities and conditions.

Constitutional values/principles

Human rights based on democratic values and social justice.

Corporate social responsibility (CSR)

A business approach that contributes to sustainable development by delivering economic, social and environmental benefits for all stakeholders.

Globalisation

The process by which businesses develop international influence through the integration of nations via the flow of goods, information, services and capital.

Stakeholders

Persons who can affect or be affected by the actions, objectives and policies of a business, including creditors, directors, employees, government, shareholders, suppliers, unions, and the surrounding community.

Transformative constitutionalism

A long-term project of constitutional enactment, interpretation and enforcement to transform a country's political, legal and social institutions and power relations in a democratic way.

Ubuntu

An inherent African belief that one is never alone ('Motho ke motho kabatho' / 'umuntu ngumuntu ngabantu'), viewing the individual as embedded in a community characterized by humaneness, compassion, social justice and fairness.

Audi alteram partem rule

A rule of natural justice stating that both sides of a story must be heard before any judicial functionary makes a decision on a matter.

Corporate governance

The system used to regulate and oversee corporate conduct to balance stakeholders' interests with maximum efficiency and profitability.

Legal personality

Also known as juristic personality; to be acknowledged in law as a person or bearer of its own rights with liability for its own debts.

Incorporation

The formation of a company through registration with the Companies and Intellectual Property Commission.

Lifting or piercing the corporate veil

A process used to ignore a company's separate legal personality to hold persons inside the company personally liable.

Profit company

A company incorporated with the objective of financial gain for its shareholders.

Non-profit company (NPC)

A company incorporated for public benefit, cultural activities, social activities, or group interests rather than financial gain for its members.

Public company (Ltd)

A profit company that can issue shares to the public, whose shares are freely transferable, and that can be listed on the JSE Limited.

Private company ((Pty) Ltd)

A profit company that prohibits the offering of securities to the public and restricts the transferability of its securities in its memorandum of incorporation.

Personal liability company (Inc)

A profit company whose directors and past directors are jointly and severally liable, together with the company, for contractual debts contracted during their periods of office.

State-owned company (SOC Ltd)

A company registered in terms of the Companies Act that is either listed as a public entity in Schedule 2 or 3 of the Public Finance Management Act of 1999 or owned by a municipality.

External company

A foreign company carrying on business or non-profit activities within South Africa.

Domesticated company

A foreign company whose registration has been officially transferred to South Africa.

Memorandum of Incorporation (MOI)

The sole registration document of a company setting out the rights, duties, and responsibilities of shareholders, directors, and others.

Notice of incorporation

The document filed alongside the memorandum of incorporation in terms of Section 13(1) to inform the Commission of the incorporation of the company.

Alterable provision

A provision of the Companies Act whose effect on a particular company may be negated, restricted, or limited in the company's memorandum of incorporation.

Unalterable provision

A provision of the Companies Act that cannot be changed in substance in the memorandum of incorporation, except to impose a higher standard or more onerous requirement.

Ring-fencing (RF)

Provisions in a memorandum of incorporation containing special conditions or restricting amendments, designated by '(RF)' after the company's name to alert third parties.

Company rules

Rules adopted by the board of directors regarding governance matters not covered in the Companies Act or MOI, which enjoy the same legal status as the MOI.

Pre-incorporation contract

A written agreement entered into before incorporation by a person acting in the name of, or on behalf of, a proposed company with the intent that the company will be bound after incorporation.

Promoter

The person who acts as the catalyst for the conclusion of a pre-incorporation contract on behalf of an unformed company.

Stipulatio alteri

A common-law contract concluded for the benefit of a third party, allowing a yet-to-be-formed company to accept or reject benefits upon incorporation.

Cession

The legal transfer of contractual rights from one party to another.

Delegation

The legal transfer of contractual duties or liabilities from one party to another, requiring the consent of all contracting parties.

Legal capacity (of a company)

The authority under the law to engage in legal acts, enter into binding contracts, and sue and be sued in its own name.

Ultra vires doctrine

The doctrine concerning acts performed beyond the legal capacity, powers, or competency of a corporation.

Doctrine of constructive notice

The doctrine providing that third parties dealing with a company are deemed to have knowledge of the contents of the company's public documents.

Turquand rule

A rule established in Royal British Bank v Turquand providing that a person dealing with a company in good faith may assume that all internal formalities and procedural requirements have been duly complied with.

Estoppel

A legal principle preventing a company from denying an agent's authority if the company intentionally or negligently misrepresented that authority and induced a third party to act to their prejudice.

Share

One of the units into which the proprietary interest in a profit company is divided, representing incorporeal, movable property.

Preference shares

A class of shares providing the holder a preferential right, such as prior receipt of dividends when declared or return of capital upon winding-up.

Ordinary shares

The residual category of a company's shares that carry no special class preferences and receive dividends after preference shareholders.

Deferred shares

A class of shares commonly issued to company founders where dividend rights are delayed until ordinary shareholders have received their dividends.

Debenture

A document issued by a company acknowledging that it is indebted to the holder in the amount stated therein; an instrument of debt financing.

Right of pre-emption (Section 39)

The statutory right of shareholders in a private company to be offered newly issued shares pro rata to their voting power before non-shareholders, preventing dilution of ownership.

Distribution

Any direct or indirect transfer of money or other property of the company (except its own shares) to shareholders in their capacity as shareholders.

Solvency test

A statutory requirement satisfied if the assets of the company, fairly valued, equal or exceed its liabilities as fairly valued.

Liquidity test

A statutory requirement satisfied if it appears the company can pay its debts as they become due in the ordinary course of business for 12 months.

Proxy

A person appointed in writing to act, speak, or vote on behalf of a shareholder at a shareholders' meeting.

Ordinary resolution

A decision taken at a shareholders' meeting with the support of more than 50% of the voting rights exercised.

Special resolution

A decision taken at a shareholders' meeting with the support of at least 75% of the voting rights exercised.

Quorum

The minimum number or percentage of voting rights required to be present at a meeting before it may begin, generally set at 25% of all voting rights.

Unanimous assent

A common-law principle where decisions taken without a formal meeting are legally binding if all voting members were aware of the facts and agreed.

Majority rule

The common-law rule stating that the will of the majority of shareholders prevails and binds all members of the company.

Director

A member of the board of a company who has given written consent to occupy the position of director or alternate director.

Executive director

A director who participates in the day-to-day management functions of a company and is usually an employee.

Non-executive director

A director who does not participate in the day-to-day management of a company and is generally not recognized as an employee.

Ex officio director

A director who holds office on the board of a company as a result of holding another specific office, status, or title.

Alternate director

A person appointed to the board of directors as a substitute for a particular elected director during a temporary absence.

Ineligible to be a director

An absolute legal prohibition preventing a person (such as a juristic person or an unemancipated minor) from ever becoming a director.

Disqualified from being a director

A legal bar prohibiting a person from acting as a director unless granted permission by a court (e.g., unrehabilitated insolvents or persons convicted of fraud).

Delinquency order

A court order under Section 162 disqualifying an individual from serving as a director for a specified period (at least seven years) or for life.

Probation order

A court order placing a director under supervision or remedial conditions for up to five years under Section 162.

Business judgement rule

A statutory rule (Section 76(4)) protecting a director from breach of duty if they took diligent steps to become informed, had no material personal financial interest, and reasonably believed the decision was in the company's best interests.

Audit committee

A statutory committee of at least three independent non-executive directors responsible for nominating the auditor and overseeing financial reporting in public and state-owned companies.

Company secretary

The principal administrative officer of a company, responsible for guiding directors on legal duties, ensuring statutory compliance, and keeping official records.

Derivative action (Section 165)

A statutory proceeding allowing an applicant to initiate legal proceedings in the name and on behalf of a company to protect its legal interests.

Appraisal right (Section 164)

A statutory right permitting dissenting shareholders who object to certain fundamental corporate transactions to exit by demanding that the company buy their shares at fair value.

Companies Tribunal

An organ established under the Companies Act to conduct voluntary alternative dispute resolution and review administrative decisions made by the Commission.

Partnership

A contractual relationship between two or more persons who carry on a lawful business with the object of making a profit, each contributing something for their joint benefit.

Universal partnership

A partnership not restricted to a specific undertaking, extending either to all present and future property (universorum bonorum) or to all commercial profits (quae ex quastu veniunt).

Particular partnership

A partnership formed specifically for a single transaction or a particular project.

Anonymous partnership (silent partnership)

An extraordinary partnership where the business is conducted in the name of active partners, and the undisclosed partner is not liable to third parties but shares full losses internally.

Partnership en commandite

An extraordinary partnership where undisclosed partners have their liability to co-partners for losses limited strictly to the amount of their agreed capital contribution.

Essentialia of a partnership

The indispensable legal elements required to form a partnership: a contribution by each partner, carrying on business for the joint benefit of all parties, and a profit motive.

Naturalia of a partnership

Terms and legal consequences implied by law into a partnership agreement that apply automatically unless altered by the partners.

Incidentalia of a partnership

Additional terms agreed upon by partners in a partnership agreement that vary the naturalia.

Mutual mandate

The implied authority of each partner to perform all acts necessary for or incidental to the ordinary conduct of the partnership's business, binding all co-partners.

Actio pro socio

A general partnership action by which any partner can compel fellow partners to perform their obligations under the partnership agreement.

Actio communi dividundo

A legal action available to co-owners (including partners upon dissolution) to obtain a physical division of jointly owned property.

Close corporation

A separate juristic entity designed for small businesses of one to ten natural persons, governed by the Close Corporations Act 69 of 1984.

Founding statement (Form CK 1)

The sole constitutive document lodged to incorporate a close corporation, detailing the members, principal business, and members' interests.

Member's interest

An incorporeal movable personal right to share in the profits of a close corporation, expressed as a percentage out of 100%.

Association agreement

An optional internal contract among members of a close corporation regulating internal management, voting procedures, and payments to members.

Trust

An arrangement whereby ownership of property is made over or bequeathed to a trustee under a trust instrument to be administered for the benefit of beneficiaries.

Trust instrument

A written agreement, testamentary will, or court order that creates a trust and defines its terms and the powers of its trustees.

Trustee

Any person authorized in writing under Section 6 of the Trust Property Control Act to administer trust property.

Bewind trust

A type of trust where the beneficiaries own the trust property, while the trustee merely manages and controls it.

Inter vivos trust

A trust created by a contract during the lifetime of the founder.

Testamentary trust

A trust created through a will of a testator that comes into existence upon the founder's death.

Nomine officio

A Latin legal phrase meaning 'in one's official capacity,' indicating that trust assets vest in a trustee only in their representative capacity, distinct from their personal estate.