Company Types in Company Law

Questions and Answers

What is required in the notice for an amendment of the MOI that affects shares?

A summary of all shareholder concerns

Percentage of voting rights required for adoption (correct)

A list of all existing shareholders

A financial projection for the next fiscal year

What is the notice period required for public companies regarding shareholder meetings?

30 business days

15 business days (correct)

20 business days

10 business days

What constitutes the votes quorum needed to start a meeting?

At least one proxy present

All shareholders must be present

At least 25% of shares entitled to vote (correct)

Majority of shareholders present in person

How many shareholders must be present for a meeting to begin in a company with more than two shareholders?

Three shareholders Signup and view all the answers

What must shareholders do if there is a defect in the notice?

Unanimously ratify the notice Signup and view all the answers

What distinguishes a public company from a state-owned company?

Public companies have shares that are not owned by public entities. Signup and view all the answers

What is the primary purpose of a non-profit company (NPC)?

To benefit a public purpose or an object specified in its memorandum of incorporation. Signup and view all the answers

How are profits handled within a non-profit company (NPC)?

Profits must be reinvested in the organization’s objectives only. Signup and view all the answers

What is a requirement for a foreign company to be classified as an external company (EC) in South Africa?

It must have at least one employment contract in South Africa. Signup and view all the answers

Which statement is true regarding the membership of a non-profit company (NPC)?

Members of an NPC have equal voting rights unless changed by the memorandum of incorporation. Signup and view all the answers

What effect does shareholder ratification of actions contrary to the MOI have?

It only has an internal effect. Signup and view all the answers

What defines a domesticated company in South Africa?

An external company that changes its registration to be recognized as South African. Signup and view all the answers

Which entity automatically has authority to act on behalf of a company?

Shareholders. Signup and view all the answers

In the context of a non-profit company (NPC), what stipulation is true about compensation?

Directors can be compensated only for services rendered. Signup and view all the answers

What is implied authority in the context of agency?

Authority that appears to be exercised by the agent. Signup and view all the answers

What must the Memorandum of Incorporation (MOI) for a non-profit company (NPC) include?

At least one object for which the NPC is incorporated. Signup and view all the answers

What must a third party demonstrate to benefit from the common law Turquand rule?

Bona fide belief and compliance with internal rules. Signup and view all the answers

Which principle allows a third party to hold a company accountable for unauthorized actions taken by its agents?

Culpable representation. Signup and view all the answers

Under which circumstances can a company claim lack of authority as a defense?

A company can never claim lack of authority. Signup and view all the answers

What does actual authority refer to in agency law?

Authority that is explicitly or tacitly given by an act. Signup and view all the answers

Which of the following is NOT a requirement for delictual liability under estoppel?

Written consent from shareholders. Signup and view all the answers

What is a key characteristic of executive directors?

They are full-time salaried employees. Signup and view all the answers

Which type of director provides more neutrality to the company?

Independent director Signup and view all the answers

Who has the authority to elect a director in a profit company?

Shareholders entitled to vote Signup and view all the answers

What must happen for a person to become eligible to serve as a director?

They must deliver written consent to the company. Signup and view all the answers

Under what condition can a director be removed by shareholders?

With an ordinary resolution. Signup and view all the answers

What does the Memorandum of Incorporation (MOI) allow regarding directors?

It can provide for alternate directors. Signup and view all the answers

Which type of director is often appointed by virtue of their position?

Ex officio director Signup and view all the answers

What requirement must be fulfilled before a director is removed?

The director must receive prior notice of the meeting. Signup and view all the answers

Which scenario demonstrates that a company is a subsidiary of a holding company?

The holding company holds 80% voting shares of the subsidiary. Signup and view all the answers

What condition would cause a subsidiary to not be considered a subsidiary of its holding company?

The holding company can dismiss 2/3 of the subsidiary's directors. Signup and view all the answers

How much of the shares in a holding company can a subsidiary hold?

No more than 10% of the shares and must be non-voting. Signup and view all the answers

Which statement about voting rights and control is correct?

Having the power to appoint the majority of directors usually indicates control. Signup and view all the answers

In what circumstance would both subsidiaries not be allowed to hold shares in a holding company?

If their combined holdings exceed 10% of the voting shares. Signup and view all the answers

Which of these is an example of a holding company not having control over a subsidiary?

Holding a majority share with the ability to dismiss directors. Signup and view all the answers

Which of the following does NOT indicate control of a subsidiary?

Dismissing the majority of the directors on the subsidiary's board. Signup and view all the answers

What is an allowable scenario for a subsidiary's investment in a holding company?

A subsidiary holds 8% of non-voting shares in a holding company. Signup and view all the answers

Study Notes

Company Types

Public Company (Ltd): Not state-owned, private, or personal liability companies.
State-Owned Company (SOC): Shares are wholly owned by public entities, controlled by the Department of Public Entities.

Non-Profit Companies (NPC)

Purpose: Formed for public benefit with objectives documented in the Memorandum of Incorporation (MOI).
Profit Regulations: Profits cannot be distributed to members or directors; all income must advance the NPC's objectives. Only compensation for services rendered is allowed.
Membership Structure: Unlike companies with shareholders, NPCs have members who possess equal voting rights, which can be modified by the MOI.
Voting Rights: MOI can define different classes of shares, including voting and non-voting shares.

External Companies (EC)

Definition: Foreign companies doing business in South Africa but incorporated elsewhere.
Requirements: Must have at least one employment contract in SA and engage in activities for at least six months.

Domesticated Companies

Process: An external company can transfer its registration to be recognized as a domesticated company, treated as if originally incorporated in South Africa.

Ratification of Actions

Shareholder Authority: Shareholders can ratify actions that contradict the MOI through special resolutions. This ratification impacts internal company operations but does not affect third-party contracts.

Representation

Organs vs. Agents: Organs (e.g., shareholders, board of directors) automatically have authority to act. Agents require specific authority granted by the MOI or board.
Authority Types:
- Actual authority (express or implied)
- Common law Turquand rule allows third parties to assume compliance with internal rules.
- Estoppel: Company cannot contest claims of authority if it facilitated unauthorized acts.

Control and Subsidiaries

Control Criteria: Control established through voting shares, ability to appoint directors, and overall voting rights.
Subsidiaries and Shareholding: A subsidiary can hold up to 10% of non-voting shares in a holding company.

Company Meetings

Notice Requirements:
- 15 business days for public companies and NPCs; 10 business days for others.
Quorum:
- Votes quorum: 25% of voting shareholders present.
- Person quorum: At least three shareholders needed if a company has more than two.

Types of Directors

Executive Directors: Active in daily operations, full-time salaried.
Non-Executive Directors: Provide oversight without daily involvement, not salaried.
Independent Directors: Non-executive directors with no other affiliations, not influenced by company relationships.

Director Election and Appointment

Election Rights: Shareholders entitled to vote can appoint directors; at least 50% of directors in profit companies must be shareholder-appointed.
MOI Provisions: The MOI may stipulate the appointment process and allow for alternate directors.

Director Removal

Removal Process:
- Shareholders can remove directors via ordinary resolution, which cannot be altered by the MOI.
- The director must be notified of the meeting and given a chance to present before removal decisions are made.

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Description

This quiz explores different types of companies including Public Companies (Ltd), State-owned Companies (SOC), and Non-Profit Companies (NPC). Test your knowledge on the characteristics and purposes of each type. Ideal for those studying company law and corporate structures.