Company Law Flashcards

Study Guide - International Training College

Company Law

  • This study guide is for the Company Law course at the International Training College - Lingua, Distance Learning Department.
  • Copyright 2020 by International Training College - Lingua, Distance Department.
  • No reproduction is allowed without permission from the publishers.
  • Contact information for the Distance Department is provided, including address, phone number, email, and website.

Contents Overview

  • The study guide covers topics such as company formation, classification of registered companies, liquidation, and insolvency procedures.
  • It also deals with necessary documents for company registration like the memorandum of association, articles of association, and certificate of incorporation.
  • The course content includes types of meetings, procedures for calling a meeting, ownership/funding structures, and appointment/termination of directors.

How to Use This Study Guide

  • Course Overview: Provides a general introduction and helps determine if the course suits you, what you need to know, what to expect, and the time investment required.
  • Course Content: The course is broken down into units, each comprising an introduction, objectives, prescribed readings, additional readings, core content, references, self-assessment activities, key words/concepts, and a unit summary.
  • Additional Resources: Each unit provides a list of optional resources like books, articles, or websites for further learning.
  • Feedback: Students are encouraged to provide feedback on course content, structure, reading materials, assignments, assessments, duration, and support.

Course Overview

  • This course introduces learners to company law, including:
    • Company formation
    • Classification of registered companies
    • Liquidation and other insolvency procedures
    • Documents needed for company registration (memorandum of association, articles of association, certificate of incorporation).
    • Types of meetings and procedures.
    • Ownership and funding structures.
    • Appointment and termination of directors.
  • Target Audience: This course is for individuals seeking an appreciation of the basics of Company Law, including company formation, classification, registering, running, insolvency, and liquidation procedures.
  • Prerequisite: Commercial Law course

Course Objectives

  • Upon completion of this course, students will be able to:
    • Demonstrate knowledge and understanding of company law areas and form critical judgments.
    • Demonstrate knowledge of social and economic policy considerations.
    • Critically analyze problems related to company regulation, apply legal principles, and present well-supported conclusions.
    • Read and study primary and secondary sources of company law, analyze information, and develop a research strategy using standard and electronic tools.
  • Prescribed Reading: Namibia Companies Act 28 of 2004.
  • Timeframe: The course runs for a full semester (at least 4 months), with approximately 80% self-study time and 20% during contact sessions.

Study Skills

  • Adult learners should take control of their learning environment, considering time management, goal setting, and stress management.
  • Reacquaint yourself with essay planning, exam coping, and using the web as a learning resource.
  • Allocate dedicated time and space for learning.
  • Suggested web resources for study skills:
    • http://www.how-to-study.com/
    • http://www.ucc.vt.edu/stdysk/stdyhlp.html
    • http://www.howtostudy.org/resources.php

Need Help?

  • For academic support, contact the Tutor-Marker.
  • For administrative matters, contact the Student Support Officer (SSO).
  • Contact details are in the tutorial letter or student Distance Education Manual.

Assignments

  • Assignments can be submitted:
    • By hand at International Training College - Lingua, Windhoek, Distance Department.
    • Via email to distancelearning@collegelingua.com
    • Uploaded on the e-learning account.
  • Emailed assignments should include a covering page with student details and a postal address for return.
  • Refer to the student Distance Education Manual for more details.

Assessment

  • The course includes two assignments and one test before the final examinations.
  • Assignments are posted on the e-learning portal, and tests given during contact sessions.
  • Assessment lengths are communicated via tutorial letters.
  • Due dates are in the tutorial letter.
  • Lecturers provide feedback within two weeks for assignments and two days for tests.

Unit 1: The Nature of a Company

Introduction
  • A company can be a corporation, association, partnership, or union that carries on a commercial or industrial enterprise.
  • Different types of companies include holding company, limited liability company, joint-stock company, investment company, and personal holding company.
  • State-specific laws exist for different types of Companies.
Objectives
  • After completing this unit, you will be able to:
    • Define company law.
    • Examine the Company as a Legal Entity.
    • Demonstrate advanced understanding of the Veil of Incorporation.
  • Prescribed Reading: Namibia Companies Act 28 of 2004.
  • Additional Reading: Butterworths Company Law Handbook 33rd edition, Company Secretary's Handbook 29th edition, and Tolley's Company Law Handbook 27th edition.
Company Law
  • Company law studies how shareholders, directors, employees, creditors, and other stakeholders interact under the entity's internal rules.
  • The essence of legal entity status arises out of incorporation.
  • An incorporated company is a corporation that has a separate legal entity or artificial legal person and exists independently (Companies Act 2004).
  • The company exists separately from the members, officers, employees, and owner.
  • According to Marc Moore, the formally separate personality of a company should prevail, regardless of economic or moral considerations.
  • An incorporated company limits the liability of members to the share capital they invested.
  • No member will be personally liable for the company’s debts, obligations, or acts (Tristan Aubrey-Jones, 2008).
  • The principle of separate legal entity is established and confirmed under English law in the Salomon v A Salomon & Co. Ltd case (1895).
  • The House of Lords held that the "corporate personality" of an incorporated company is distinct from its shareholders, even if the company is owned and directed by one party.
  • The company acts, and the company is liable (Tristan Aubrey-Jones, 2008).
  • The company becomes an artificial legal person and enjoys human rights protection (Tristan Aubrey-Jones, 2008).
Salomon v A Salomon & Co. Ltd
  • According to Lord MacNaughten, a company is a different person from the subscribers to the Memorandum.
  • Even if the business is the same and the same persons are managers, the company is not the agent or trustee of the subscribers.
  • Subscribers are not liable except as provided by the Act.
  • The principle of separate legal entity exists when a corporation has a proper incorporation.
  • The corporation's legal personality is granted by law and allows natural persons to carry out legal activities.
  • According to Lord Denning, a company is likened to a human body with a brain, nerve center, and hands.
  • Directors and managers represent the directing mind and will of the company.
Adams v. Cape Industries plc
  • This case supports Salomon v A Salomon & Co. Ltd, concerning the principles of separate legal personality and limited liability of shareholders.
  • The precedent treats members and the company as separate entities.
  • In the concept of a separate entity, all company’s activities must be treated with its own capacity and indefinite existence unless merged or dissolved.
  • According to A. Gumbo, ZOU Module, a company entails people contributing money to an organization with independent existence from the contributors.
  • Owners, directors, managers, and employees manage the company as an artificial person instead of a human being.
  • This depersonalized conception enables the company to be "completely separated" from its members (Gower, 1979).
Effects of Incorporation
  • According to Section 16(5) Companies Act 1965, the principle of separate legal entity comes with several effects of incorporation after successful registration.
  • These effects include limited liability of members, the ability to make contracts with its own shareholders, to sue and be sued in its own name, to own land or property, and perpetual succession.
  • Limited liability contrasts with sole proprietorship and partnership, where liability is unlimited.
  • The liability of members is limited to the amount agreed upon winding up.
  • The company is responsible for all debt incurred (Re Application by Yee Yut Ee).
Fairview Schools Bhd v Indrani Rajaratnam & Ors
  • Mahadev Shanker J said that limited companies are formed so shareholders are not exposed to unlimited liability for the company’s debt.
  • In exchange for this immunity, share capital is pumped into the company for the creditors.
  • A company can contract with its own shareholders.
  • Any contract between the company and its members is not illegal due to the principle of separate legal entity.
  • In the Salomon case, the company borrowed money from its shareholders to operate.
Lee v Lee’s Air Farming Ltd
  • Although Lee was the owner, he was also an employee, so the contract was legal, and his wife could claim insurance (David Scrimshaw, 2005).
  • A company can sue and be sued in its own name due to the principle of separate legal entity.
Foss v Harbottle
  • The company, not its shareholders, has the right to sue for injury to the company.
Vu Siew Chin v Wong Fah Yoon
  • Wan Suleiman FJ stated that law allows the company’s name to be sued by other people (Aishah Bidin, 2008).
  • A company has the right to own land or property due to separate legal entity principle.
  • However, it is subjected to certain restrictions as stated in Section 19(2) Companies Act 1965 (Aishah Bidin and others, 2008).
  • The company has ownership rights distinct from its members.
Macaura v Northern Assurance Co Ltd
  • Macaura could not claim insurance on the timbers because they belonged to the company.
  • A change in ownership will not affect the ownership of the property.
Abdul Aziz bin Atan & Ors v Ladang Rengo Malay Estate Sdn Bhd
  • Transfer of shares will not affect the personality of the company itself.
  • A company has a perpetual succession, continuing regardless of membership changes.
Re Noel Tedman Holdings Pty Ltd
  • Both shareholders and directors died in a traffic accident, but the company still existed.
  • The company continues to exist until the statutory procedure Section 208 Companies Act 1965 deregisters it (Aishah Bidin and others, 2008).
The Veil of Incorporation
  • One key feature of companies is their separate legal personality, confirmed in law in 1897 in Salomon v Salomon & Co.
  • Separate legal personality can have unintended consequences, particularly in smaller, family companies.
B v B (1978) Fam 181
  • A discovery order was not effective against the husband’s company as it was separate and distinct from him.
Macaura v Northern Assurance Co. Ltd.
  • A claim failed when the insured transferred timber to a company wholly owned by him; he no longer had an