Week 6: Partnerships and Types of Companies PDF

BUSINESS AND CORPORATE LAW WEEK 6: PARTNERSHIPS AND TYPES OF COMPANIES  Week 6: Objectives By the end of the lesson, the student should be able to: 1. Explain the types of partnerships 2. Describe the rights and duties of the partners 3. Explain and distinguish the types of companies 4....

BUSINESS AND CORPORATE LAW WEEK 6: PARTNERSHIPS AND TYPES OF COMPANIES  Week 6: Objectives By the end of the lesson, the student should be able to: 1. Explain the types of partnerships 2. Describe the rights and duties of the partners 3. Explain and distinguish the types of companies 4. Describe the process for registration of a company  Partnerships Essentials of a partnership: -Contract (rights and duties of each partner) -2-20 persons (section 515 Companies Act) -Contribution -Common stock -Profit -Joint benefit Two (2) types of partnerships: General/ordinary partnership and limited partnership. Most partnerships are general/ordinary NB: Under Botswana law, there is no partnership that is a separate legal entity  Limited/extra-ordinary partnerships The partnership is not a separate legal entity At least one partner but not all partners has limited liability His extent of liability of such a partner is an internal matter within the partnership Third parties dealing with the partnership are not aware of the limitation of his liability The partner with limited liability should not participate in managing/running the business ( a sleeping partner) If he does, he becomes jointly and severally liable The other partners have joint and several (individually) liability to third parties dealing with the partnership  Partnerships cont. Ordinary/general partnership: Every partners has the right to participate in managing the business. Percentage ownership determines the decision- making power of a partner. Duties of a partner Good faith/fiduciary ( a partner is a fiduciary): -no disclosure of confidential information -No secret profits -honesty -Maintain a true account -provide all information -Not to compete with the firm -firm property should not be used for own use by the partner  Partnerships cont. Ordinary partnership cont. Contribution (he could be sued) To participate in the management To participate in carrying on of the business Use power within limits To abide the decision of the majority To pay his share of partnership loss  Partnerships cont. Ordinary partnerships cont. Rights of a partner: To profit To participate in the management and carrying on of the business; right of opinion. NB: This does not apply to a partner with limited liability in a limited liability partnership. To exercise power To existence: not to be expelled To retire: by serving notice (subject to his contribution towards any losses of the firm) Access to books Reimbursement Indemnity against third party claims arising in the course of business  Company and partnership distinguished Distinction between a p/ship and a company: p/ship not a legal personality; a co. incorporated under the Companies Act is; Joint (together) and several (separate) liability of partners in a partnership (general/ordinary): shareholders in a co. not liable for its debts Registration: p/ship may be formed informally; co. must be registered under the Companies Act Termination: insolvency of a partner, death etc bring a p/ship to an end; co. has perpetual succession M/ship: P/ship not more than 20; public co. has no limitation under the Act; Pty maximum 25 members; CC maximum 5. No separation between ownership and control in a p/ship; Such separation exists in a co.  Types of limited liability companies Two (2) Types of companies: 1. Companies with share capital: (a) Private (Proprietary (Pty) Co Ltd: cannot issue shares to the public; no debentures to the public; cannot be listed on the stock exchange; at least one shareholder; at least one director; may be exempt or non-exempt. Exempt: No appointment of auditor; can appoint any suitable person as a company secretary (b) Public co (no Pty before Ltd): Can issue shares to the public; can issue debentures to the public; at least one shareholder; at least two directors; may be listed on the stock exchange; is not exempt: Must appoint an auditor; must appoint a person qualified under the Companies Act as its company secretary, e.g., a member of BICA.  Types of companies 2. Companies without a share capital (a) Company limited by guarantee: The liability of a member is limited to the amount stated in the application for registration. No minimum and no maximum. Example: Botswana Accountancy College. No sharing of profits among the members. Profits are utilized by the business NB: Under Botswana law, there is no registered company which has limited liability. It is the member/shareholder of the company who has limited liability. Every company has unlimited liability.  Types of companies (b) Close company (CC): -1-5 members -Natural persons only unless an artificial member is a nominee office (appointed as a representative but not as a beneficiary) -No shares -%interest of a member Management: - A member has a right to participate (NB: This is the only type of company in which a member as a member has a right to manage the company because there are no directors unlike in the other companies) - % interest determines voting power - may delegate to a manager A CC cannot engage in the business of banking and finance because it does not have a share capital Company Registration The registration process is now electronic from the manual system. All necessary form are available on (Companies and Intellectual Property Authority (CIPA) website: https://www.cipa.co.bw › forms-downloads-2 The first requirement is reservation of company name Co name: -Should not contravene the Banking Act -Not identical or almost identical to a reserved name  Company registration Registration cont. -Not identical or almost identical to a reserved name -not identical to a registered name: See delict-passing off, Pie City case -not calculated to mislead the public or cause offence -Prohibited names: Authority; Government; National’ Presidential -Should not suggest association with the Government or statutory body; United Nations unless with the consent of the Minister  Company registration Application for registration: -Use prescribed forms (It depends on the type of co) -Name; take of Registrar reserving name -Full name; residential address of director(s) and the co secretary; -in CC, particulars of the member; size and % of contribution -Co limited by guarantee: amount of guarantee of a member if co is insolvent Company registration -Particulars of shareholders-names etc -No of shares to be issued -Amount of consideration/payment for the shares -State if co is pty-if this is not done, the co shall be deemed to be a public co. -Registered office of the proposed co -If registration documents signed by agent, instrument authorising him -Solemn declaration: application complies with Companies Act Company registration Explain the meaning of the term limited liability company from the context of: a. A company having share capital b. A company limited by guarantee c. A close company Class discussion in week 7 lecture: Study and prepare to make comments on the following: Salomon v Salomon; Macaura v Northern Assurance; Dadoo Ltd v Krugersdorp Municipal Council Thank You