Corporate Law and Entrepreneurial Forms Flashcards

Comprehensive vocabulary flashcards covering South African commercial law concepts including partnerships, companies, and close corporations based on the RHCGL151 lecture notes.

Sole Proprietorship (Eenmansaak)

A business conducted in the owner's own name by one natural person with no registration requirements and no separate legal personality.

Partnership (Vennootskap)

A contractual association of two or more persons who contribute money, goods, or services to carry out a business with the main objective of making and sharing profit.

Close Corporation (Beslote Korporasie)

A form of business regulated under the Close Corporations Act 69 of 1984 that has its own legal personality; new ones can no longer be registered.

Company (Maatskappy)

A juristic person incorporated under the Companies Act 71 of 2008, possessing separate legal personality and independent existence from its shareholders.

Legal Personality (Regspersoonlikheid)

The legal status of an entity as a carrier of its own rights and obligations, allowing it to exist independently of its members or owners.

Essentialia of a Partnership

The three requirements for a valid partnership: each partner must contribute, the business must be for joint benefit, and the main objective must be profit (winsbejag).

Actio pro socio

A legal action used to enforce rights between partners, such as compelling a partner to make their agreed contribution to the partnership.

Actio communi dividundo

A legal action generally instituted after the dissolution of a partnership to divide the joint partnership assets.

Mutual Mandate (Onderlinge mandaat)

The implied power of a partner to enter into transactions with third parties on behalf of the partnership, provided the transaction falls within the scope of the business.

Section 21 Contract (Voor-inkorporasiekontrak)

A written contract entered into by a person on behalf of an entity that is intended to be incorporated but does not yet exist.

Ratification (Bekragtiging)

The act of a company's board of directors accepting and becoming bound by a pre-incorporation contract within $3$ months after incorporation.

Memorandum of Incorporation (MoI / Akte van Oprigting)

The document that incorporates a company and defines the rights, duties, and responsibilities of shareholders, directors, and others.

Piercing the Corporate Veil

A legal concept where the separate legal personality of a company is ignored by a court, typically when business is conducted recklessly, with gross negligence, or fraudulently.

Ultra Vires

A common law doctrine meaning 'beyond powers', referring to acts performed by a company that are outside the scope of its defined objectives.

Turquand Rule (Common Law)

A rule stating that a third party acting in good faith is entitled to assume that a company's internal requirements and procedures have been followed.

Section 20(7) of the Companies Act

The statutory version of the Turquand Rule, protecting bona fide third parties (excluding directors/shareholders) from the consequences of a company's failure to comply with internal formal requirements.

Authorized Share Capital (Gemagtigde aandelekapitaal)

The total number of shares a company is legally permitted to issue as specified in its Memorandum of Incorporation.

Issued Share Capital (Uitgereikte aandelekapitaal)

The portion of a company's authorized share capital that has been allocated and held by shareholders.

Preference Shares (Voorkeuraandele)

Shares that grant the holder priority regarding dividend payments over ordinary shareholders.

Solvency and Liquidity Test

A two-part test for distributions requiring that assets exceed liabilities (solvency) and that the company can pay its debts as they become due in the next $12$ months (liquidity).

Ordinary Resolution

A decision by shareholders supported by a majority (more than $50\%$) of the voting rights exercised on the resolution.

Special Resolution

A decision by shareholders supported by at least $75\%$ of the voting rights exercised on the resolution.

Fiduciary Duties (Vertrouenspligte)

The common law duties of directors to act in good faith, avoid conflicts of interest, and act in the best interests of the company.

Duty of Care, Skill, and Diligence

The statutory standard requiring directors to act with the care and skill reasonably expected of a person with their functions and experience.