FACULTY OF ECONOMICS,

DEVELOPMENT & BUSINESS

SCIENCES

SCHOOL OF DEVELOPMENT
STUDIES

BACHELOR OF LAWS (LLB) PROGRAMME

STUDY GUIDE 2024

(SEMESTER 1)

Corporate Law
Module Code: LCO 301

Study guide compiled by:

Mrs TC Tebele-Mosia

Copyright ã 2024 edition.

University of Mpumalanga, Mbombela Campus.
No part of this book may be reproduced or transmitted in any form or by any means, electronic or
mechanical including photocopying and recording without written permission from the publisher.
 TABLE OF CONTENTS

TABLE OF CONTENTS1. CONTACT INFORMATION2. WORD OF WELCOME

3. MODULE INFORMATION
4. PREREQUISITES
5. RATIONALE FOR THE MODULE
6. PURPOSE OF THE MODULE7. HOW TO USE THE STUDY GUIDE
8. CONSULTATION HOURS
9. MODULE OUTCOMES
10. PRESCRIBE AND SUPPLEMENTARY READINGS
11. STUDY UNITS
12. ASSESSMENT12.1 ASSESSMENT TASKS & WEIGHTING
12.2 Assessment Criteria12.3 Moderation13. Module rules
13.1 Class Attendance, Preparation and General Conduct13.2 Plagiarism and Academic
Integrity................................................................................................................................................

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 1. CONTACT INFORMATION

Position Name Office Telephone Email Address

Room.109
Facilitator Mrs TC Tebele-Mosia Archive 0130020216 [email protected]
Building
Programme Prof Akhabue
220, BLDG 9 0130020379 [email protected]
Leader Okharedia
Head of School Prof Estelle Boshoff 206, BLDG 4 013-002-0196 [email protected]
Faculty
Mr Siphesihle Khanyile 209, BLDG 4 013-002-0236 [email protected]
Administrator
School
Ms Lewane Nchabeleng 209, BLDG 4 013-002-0286 [email protected]
Administrator

2. WORD OF WELCOME
Welcome to Corporate Law. The quest by man to satisfy his needs in the face of scarce resources and
limited individual endowments is the foundation of business activities. Such needs were initially met
through the exchange of goods and services in such manners as were described by the economists as trade
by barter. The introduction of money as a means of exchange has greatly enhanced business activities in the
society. Goods and services could now be moved and exchanged under different business structures
recognised by law. The understanding of the organisation and operations of those business structures which
are recognised by South African law to facilitate the exchange of goods and services is the focus of the law
of business entities.

3. MODULE INFORMATION

Module Name Corporate Law 1A

Module Code LCO 301 Development date January 2024

Facilitator Mrs TC Tebele-Mosia

Programme Bachelor of Laws (LLB)

Faculty Economics, Development

School Development Studies
& Business Sciences

Year/level 3 NQF level 7

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Credits 12 Notional Hours 120

4. PREREQUISITES

NQF Level 7
5. MODULE DESCRIPTION & LEVEL DESCRIPTORS

The module covers the various business structures that are recognised under South African law, such as sole trader,
partnership, company, close corporation, and business trust. The intricate formative, organisational and functional
parameters of these business organisations/entities that strive daily to provide for the needs of society through the
exchange of goods and services are discussed. The very wide scope of the module contrasts sharply with the limited time
frame (one semester). Therefore, a high level of commitment is demanded from all involved to make an appreciable
impact within the limited space.

This module is pitched at National Qualification Framework (NQF) level 7. This is a third-level module in the LLB
programme, which presupposes the student has acquired sufficient background knowledge at the lower levels to enrol
for this module. The philosophical underpinning of the NQF level 7 is applied competency. Emphasis will therefore be
placed more on the practical and critical skills approaches to learning than the analytical approach. Students should be
able to appreciate how the basic legal principles are deployed to resolve real-life issues in the business environment and
identify gaps in the law with suggestions for improvement through critical reasoning.

6. PURPOSE OF THE MODULE

The purpose of the course is to introduce the student to the general principles of business organisations/entities and to
equip the student with such intellectual and practical knowledge in the field as would enable him/her to further explore
those principles at a higher level and in real-life situations. This will be done through the definition, essential distinctions
and functionalities of the different types of business organisations/entities. The discussions on the specific types of
business organisations/entities will be practically illustrated in the lectures to give the student a clear insight into the
functioning of the various business organisations/entities and how they are formed, managed and dissolved.

7. HOW TO USE THE STUDY GUIDE

This study guide should be used with the prescribed text/readings, information on Moodle and the slides used in the
contact sessions. It links the material to the outcomes that you must achieve. You should regularly consult Moodle for
updates on the work schedule, reading material and assessments.
8. CONSULTATION HOURS & CLASS TIMES

It is imperative that you prepare for the contact/online sessions by using the textbooks and other prescribed material.
There is not enough time during contact/online sessions to lecture the textbooks page by page, and during these sessions,
we will focus on key terms and concepts.
Contact Classes will be from 00h00-15h00 at Multipurpose Auditorium 04
Consultations will be on Tuesdays from 10h00-15h00 and Thursdays from 10h00- 15h00
9. MODULE OUTCOMES

Upon successful completion of this module, students should be able to:

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o Appreciate the importance of the Corporate Law in the wider South African jurisprudence.
o Explain the distinctions between different types of business entities.
o Appreciate why a particular type of business entity should be preferred to the other in different business climates.
o Advise those running the affairs of the business entities on what is expected of them to sustain the operations of
those entities.
o Advise the less informed members of his/her community on the formation, management, and dissolution of a
business entity.
o Advise the less informed members of his/her community on the various remedies available to them while having
dealings with the business entities.
o Resolve disputes relating to the operations of business entities.

10. PRESCRIBED & SUPPLEMENTARY READINGS

Books

Piet Delpot () New Entrepreneurial Law 2nd ed LexisNexis

Robert Sharrock, (2007) Business Transactions Law 9th ed JUTA & Co Ltd
JJ Henning, (2014) Perspectives on the Law of Partnership in South Africa, JUTA & Co Ltd
Farouk HI Cassim et al (eds), (2012) Contemporary Company Law 2nd ed JUTA & Co Ltd
Dennis Davies et al (eds) (2010) Companies and other Business Structures in South Africa 5th ed (Cape Town)
Oxford University Press Southern Africa Pty Ltd.

HI Cassim et al (eds), (2012) The Law of Business Structures JUTA & Co Ltd

Statutes
Companies Act 71 of 2008 as amended
Insolvency Act 24 of 1936
Trust Property Control Act 57 of 1988
Close Corporations Act 69 of 1984

11. KEY LEARNING UNITS

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Unit / Topic

Unit 1: Chapter 1
Introduction and Overview
 Introduction
 The forms of business structures
 The sole trader (or sole proprietorship)
 The partnership
 The Company
 The disadvantages of a company
 The closed corporation
 Some important differences between private companies and
 close corporations
 The business trust

UNIT 2: Chapter 2 Partnerships

 The definition of a partnership
 The essential elements of a partnership
 Contribution by each party
 Carrying on a business in common for the joint benefit of the
 parties
 The object of making a profit
 A legitimate contract (or lawfulness)
 The subjective intention to form a partnership
 The juristic nature of a partnership
General
Exceptions to the juristic nature of a partnership
 The types of partnerships

UNIT 3: Chapter 3 Business Trusts

 Introduction
 Nature of a business trust
 No legal personality
 The law governing trusts
 Legal basis of a trust
 The essentials of a trust
 Sham trusts
 Flexibility of a trust
 The rights of beneficiaries
 The discretionary trust
 Who may be a beneficiary?
 Trustees
 Variation or revocation of a trust
 Advantages and disadvantages of a trust
UNIT 4: Chapter 4 The Legal Concept of a Company

 Introduction
 Legal personality
 The concept of separate legal personality

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  Salomon v Salomon & Co Ltd
 Legal consequences of separate legal personality
 Exceptions to the principle of separate legal personality
 The distinction between ‘piercing’ the veil and ‘lifting’ the veil
 The approach adopted to piercing the veil in our common law
 Quasi-partnerships
 Agency/alter ego doctrine
 Company groups
 Piercing the corporate veil under the Act
 Imposing personal liability on the directors of a company

UNIT 5: Chapter 5 Types of Companies

 Introduction
 Profit and non-profit companies
 Types of profit companies
 The private company
 The public company
 Differences between public and private companies
 The personal liability company
 The state-owned company
 Non-profit companies
 Conversion of companies
 The impact of the Act on pre-existing companies
 External companies
 Domesticated companies
 The impact of the Act on close corporations
 The impact of the Act on partnerships

 UNIT 6: Chapter 6 Formation of Companies and the Company Constitution

 Incorporation and registration of companies
 Company names
 The Memorandum of Incorporation
 Rules of the company
 Shareholder agreements
 The legal status of the Memorandum of Incorporation and rules
 Pre-incorporation contracts

UNIT 7: Chapter 7 Corporate Capacity, Agency and the Turquand Rule

 Legal capacity of the company
 The doctrine of constructive notice
 The Turquand rule (the presumption of compliance with formal and procedural requirements)

UNIT 8: Chapter 8 Groups of Companies and Related Persons

 The holding/subsidiary relationship
 Directors’ fiduciary duties and the holding/subsidiary relationship

UNIT 9: Chapter 9 Shares, Securities and Transfer

 Introduction
 Nature of a share

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Classes of shares
• Preference shares
• Redeemable shares
• Ordinary shares
• Deferred shares
 Authorisation for shares
 Authority to issue shares
 Consideration for shares
 Capitalisation shares
 Debt instruments
 Shareholders’ pre-emption rights
 Registration and transfer of securities

UNIT 10: Chapter 10 Corporate Finance

 Introduction
 Distributions
 Repurchases (buy-backs)
 Acquisition by a company of shares in its holding company (indirect repurchases)
 Financial assistance for the acquisition of securities
 Financial assistance to directors and others

UNIT 11: Chapter 11 The Duties and the Liability of Directors

 The fiduciary duties of company directors: General
 The duty to act in the best interests of the ‘company’
 The duty to act in good faith and in the best interests of the company
 Conflict of interest :
 Duty of care, skill and diligence
 The disclosure of the director’s personal financial interests
 Indemnification and directors’ and officers’ insurance
 Directors’ and officers’ liability insurance
 The liability of directors and prescribed officers
 Fraudulent, reckless and insolvent trading

UNIT 12: Chapter 12 Governance and Shareholders

 Introduction
 Shareholders
 Definition of ‘shareholder’
 The record date for determining shareholder rights
 Instances where compliance with formalities is not required
 Proxies
 Shareholders’ meetings
 Convening a shareholders’ meeting
 Notice of meetings
 Conduct of shareholders’ meetings
 Voting at meetings
 Chairperson at meetings
 Quorum
 Postponement and adjournment of meetings
 Shareholder resolutions
 Written resolutions

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  Company records

UNIT 13: Chapter 13 Governance and the Board of Directors

 Introduction
 Who is a ‘director’?
 Definition of a ‘director’
 The legal position of directors
 Prescribed officers
 Office-bearers of the company
 Number of directors
 Appointment of directors
 Terms of appointment
 Record of directors
 Company rules
 Ineligibility and disqualification of persons to be directors.
 Delinquent directors and directors on probation
 Vacancies on the board of directors
 Removal of directors
 Retirement from office
 Resignation of directors
 Remuneration of directors

UNIT 14: Chapter 14 Shareholder Remedies and Minority Protection

 Relief from oppressive or prejudicial conduct
 The derivative action
 Dissenting shareholders’ appraisal rights
 Application to protect the rights of securities holders
 Other shareholder remedies

UNIT 15 : Chapter 15 Enforcement and Regulatory Agencies

 Introduction
 General principles on remedies
 Regulatory agencies
 Alternative procedures for addressing complaints or securing rights
 Complaints to the Companies Commission
 Voluntary resolution of disputes
 Companies Tribunal adjudication proceedings
 Offences
 Civil actions (section 218(1))

UNIT 16 : Chapter 16 Business Rescue and Compromises

 Introduction
 The meaning of ‘business rescue’
 The commencement of business rescue proceedings
 The duration of business rescue proceedings
 The legal consequences of a business rescue order
 The business rescue practitioner
 The business rescue plan
 The rights of ‘affected persons’

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  The consideration and adoption of the business rescue plan
 Compromise with creditors

Chapter 17: Close Corporations

 Introduction
 Features of a close corporation
 Formation and conversion of a close corporation
 Membership of a close corporation
 Contributions (section 24)
 Association agreements and internal relations
 Payments to members
 Duties of members
 Capacity, authority and contracts of a close corporation
 Pre-incorporation contracts
 Liability of members for close corporation’s debts
 Liability for reckless or fraudulent carrying on of the business of a cc

Learning outcomes Assessment criteria

The learner will be able to: The learner will be competent if he/she:

1. analyse the history and 1.1 can identify and link key developments in the history of company law and
development of the South other business entities for South Africa
African company

2. evaluate the rules regarding 2.1 can appraise the principles and rules regarding the recognition and disregard
corporate legal personality of the legal personality of a company.
2.2 can critically describe the principles relating to corporate capacity.
2.3 can evaluate the impact of corporate groups on the efficacy of rules
underlying corporate personality

3. appraise the principles of 3.1 can formulate critically the key principles regarding the imposition of
corporate criminal liability criminal liability in the corporate context.

4. analyse critically the legal 4.1 can critically describe the key principles of good corporate governance.
principles of corporate 4.2 can formulate and apply critically the principles regarding the duties of good
governance with emphasis on faith and care and skill of directors.
the directors of a company, 4.3 can formulate and apply critically the principles relating to the personal
their duties and their potential liability of directors for debts of the company
personal liability

5. interpret and analyse the legal 5.1 is able to evaluate the case for and principles of creditor protection in
principles relating to the company law
protection of creditors and 5.2 can describe and evaluate the rules affording protection to shareholders of
shareholders of companies companies

6. interpret and evaluate the 6.1 can formulate and apply critically key approaches to the social responsibility
principles of corporate social of companies

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 responsibility

12. ASSESSMENT

12.1 Assessment Tasks & Weightings

Formative Assessment
Assessment will be done through quizzes, tests, assignments, presentations, and written examinations. A student will fail
the module if a participation mark of less than 40% is achieved. Calculation of the participation mark will be done as
follows:

Test 1 35
Test 2 35
Presentation 30
Participation Mark 100%

Summative Assessment
Students are required to obtain a participation or semester mark of at least 40% in order to gain examination entry. The
participation is calculated as illustrated above. A 3-hour closed book examination will be written out of 100 marks.

Final Module Mark

The participation/semester mark is 50%, and the examination mark is 50%. The final module mark is the weighted
average of formative assessments and summative Assessments. A final mark of 50% means “pass”, and 75% means “pass
with distinction”.

12.2 Assessment Criteria

In presentations, discussions, written assignments, quizzes, tests and examinations evidence of achievement of the stated
outcomes will be demonstrated when the student is able to provide or do the following:
o Successfully complete well-written and structured assignments
o Successfully complete quizzes and tests
o Actively engage in class and group discussions
o Demonstrate knowledge of work covered in the course through successfully completing written examinations.

12.3 Moderation

As an integral part of the assessment, Moderation at UMP is guided by the approved Assessment and Moderation of
Student Learning Policy. The approach to moderation of non-exit level modules is as follows:

Formative assessment: The lecturer designs the assessment strategy and sets the formative assessments. The University
uses a system of internal moderation where each assessment is reviewed (moderated) by a senior colleague in the
programme or school. The assessment is written under full examination conditions if it is a test marked by the lecturer. A
sample (20 – 30% depending on the class size) or all the scripts/assignments in accordance with the UMP Policy are
moderated by the external moderator.

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Summative assessment: The lecturer sets the summative assessment tools and these are moderated by the external
moderator and then subject to careful review at a School Examinations Committee meeting. The students complete the
summative assessment which is marked by the lecturer, and a sample of the scripts/assignments or all the scripts/
assignments (as described above), are moderated by the Internal Moderator. The internal moderator will have received a
summary of the assessment strategy, a full set of module documentation, including the rubrics, and a full set of model
answers. The report from the Internal Moderator is reviewed by the Lecturer, Program Leader, Head of School and Dean
and changes are made as necessary.

13. MODULE RULES

13.1 Class attendance, preparation, and general conduct

Students are expected to attend all lectures, tutorials, and other formal learning activities in accordance with the university
rules. Students are also encouraged to read the assigned materials ahead of lectures and to participate actively and
constructively, always considering the positive correlation between what one takes out of lectures and what one is
prepared to put in through effort and preparation.

In accordance with the university values, which include excellence, integrity, diversity and collaboration, students are
further expected to conduct themselves properly and show respect for both the lecturer and fellow students; this includes
punctuality for all lectures and related meetings.

13.2 Plagiarism and academic integrity

Students should remember that plagiarism is an academic crime, and anyone whose writing displays instances of
plagiarism will be sanctioned, as plagiarism is a serious offence at the UMP and will be dealt with in terms of the
university’s Academic Integrity Policy.

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