QUESTION ONE [40]
Discuss the consequences of a company having a separate legal personality. (12)
Contravention of the Companies Act 71 of 2008 is regarded as a criminal offence.
In light of the above discuss the protective measures when determining a name for a company. (18)
Discuss the application of the ultra vires doctrine. Refer to case law in support of your answer. (10)

QUESTION TWO [30]
Provide a detailed discussion on pre-incorporation contracts and refer to the section in the Companies Act 71 of 2008 and a relevant case law. (20)
The Companies Act 71 of 2008 regards the issuing of shares as a management decision, unless specifically limited in the Memorandum of Incorporation; the board of directors has amongst other powers, the power to issue shares without the shareholders approval. Discuss the instances when a special resolution is required for the shareholders to approve a resolution by the board of directors. (10)

QUESTION THREE [30]
Section 4 of The Companies Act 71 of 2008 set out the test to be applied by company’s directors when entering into certain transactions. Discuss the test and its applicability. Include reference to the relevant sections on the Companies Act 71 of 2008. (23)
Explain the composition of a quorum. (7)

Answers to Above Questions on Commercial Accounting

Answer 1: An analysis of the concept of separate legal personality indicates that it has several legal and practical consequences. The major consequence of such concept is that there is limited liability in separate legal personality which indicates that shareholders are not personally liable for any of the company’s debt and obligation. It has complex legal formalities which requires significant amount of compliance and it can be costly as well.