Midlands State University: Faculty of Law
Company Law LB207
2012
Lecturer:
Batie Chokuda
Contact:
chokudabt@msu.ac.zw/ chokudabt@gmail.com
Evaluation:
30% class assignment & test
70% examination
Course Outline:
1. Introduction
1.1.
Historical development of the modern company
1.2.
Section 89 of the Constitution of Zimbabwe and the common law foundation of
Zimbabwean company law
1.3.
Objectives of company law
1.4.
The Companies Act [ Cap 20:03]
2. Formation of and the Nature of a company
2.1.
What is a company?
2.2.
The concept of Separate legal Personality
2.3.
Legal consequences of separate legal personality
2.3.1. limited liability
2.3.2. rationale for limited liability
2.3.3. lifting the corporate veil
2.4.
formation of a company:- memorandum and articles of association
2.5.
registration and the effect of articles of association
2.6.
main types of companies
2.6.1 Public companies
2.6.2 Private companies
2.6.3. Private Business Corporations
Cases
(a)
Salomon v Salomon & Co (1897) AC 22 (HL)
(b)
Dadoo v Krugersdorp Municipality 1920 AD 530
(c)
People’s Pleasure Park Co v Rohleder 1 61 SE 794 (Va 1908)
(d)
Macaura v Northern Assurance Co Ltd [1925] AC 619
(e)
Cooks v Deeks 1916 (1) AC 554
3.
Capacity and Representation
3.1.
Representation of the company
3.1.1. Authority of company directors
(a) Actual authority
(b) Ostensible authority
(c) Usual authority
(d) Ratification
3.2
Capacity of a company and the ultra vires doctrine
3.2.1. The consequences of an ultra vires contract
3.2.2. Ratification of an ultra vires act
3.3.
The Turquand Rule
Cases
(a) Royal British Bank v Turquand (1856) 6 E & B; 119 ER 886
(b) Ashbury Railway Carriage and Iron Co v Riche (1875) LR 7 HL
(c) Re Horsley & Weight Ltd [1982] 3 ALL ER 1045 (CA)
(d) York Corporation v Henry Leetham & Sons Ltd [1924] 1 Ch 557
(e) Regal (Hastings) Ltd v Gulliver [1967] 2 A.C 134
(f) Fareen v Sun Services SA Photo Trip Management [2003] 2 ALL SA 406
(g) Mine Workers v Prinsloo 1948 (3) SA 831
(h) Panomora Developments(Guildford) (Pty) v Fidelis Furnishing Fabrics [1971] 2 QB
711 [1971] 3 ALL ER 16
4. Corporate Securities: Equity and Debt Finance
4.1.
What are corporate securities?
4.2.
The nature and classification of shares
(a) Preference shares
(b) Redeemable shares
(c) Ordinary shares
(d) Deferred shares
4.3.
Share Issue and Consideration for shares
4.3.1. Registering the member
4.4.
Public Offer of Shares
4.4.1. Types of Offers
(a) Initial Public Offering
(b) Primary Offering
(c) Secondary Offering
4.4.2. Regulation of public issues
4.4.3. The prospectus
4.4.4. Sanctions for misleading information
4.5.
Transfer of Shares
4.5.1. Uncertificated shares
4.6.
Share Capital
4.7.
The meaning of share capital
4.7.1. Functions of share capital
4.7.2. Raising share capital
4.7.3. Authorised and minimum share capital
4.7.4. Par value
4.8.
Capital Maintenance and Creditor Protection
4.8.1. Share buy-backs
4.8.2. Financial assistance
(a) For acquisition of shares
(b) To directors
4.9.
Distributions
4.10.
Debt Finance
4.10.1. Debentures and debenture stock
4.10.2. The legal nature of debentures
4.10.3. Issue of debentures
4.10.4. Protection of debenture holders
4.10.5. Hybrid securities
Cases
(a) Bradbury v English Sewing Cotton Ltd [1923] AC 744 (HL) 746
(b) Cooper v Boyes 1994 (4) SA 521 (C) 535
(c) Borland’s Trustees v Steele Bros. & Co. Ltd [1901] 1 Ch. 279
(d) Short v Treasury Commissioners [1948] 1 K.B. 122, CA
(e) Whittome v Whittome (No. 1) 1994 S.L.T 114 (O.H)
(f) Re National Telephone Co [1914] 1 Ch 755 Bond v Barrow Haematite Steel Co [1902]
1 Ch 353
(g) Will v United Lankat Plantations Co Ltd [1914] AC 11 (HL)
(h) Re Handevel Pty (Ltd) (1983) 8 ACLR 44 50-1 SC (Vic)
(i) City of Edinburgh v British Linen Bank [1913] AC 133
(j) British India Steam Navigation Co v Inland Revenue Commissioner (1881) 7 QBD 165
(k) Levy v Abercorris Slate & Slab Co (1887) 37 ChD 260
(l) Gold Fields Ltd v Harmony Gold Mining Co Ltd 2005 (2) SA 506 (SCA)
5. Governance and Management of a Company
5.1.
Company organs: the Board of Directors and Shareholders acting in general meeting
5.2.
The Board of Directors
5.2.1. Appointment and qualifications of directors
5.3.
Duties of directors
5.3.1
Fiduciary duties
5.4.
(a)
What are fiduciary duties?
(b)
To whom do directors owe their fiduciary duties?
(c)
The duty to act in good faith and in the best interests of the company
(d)
The duty to act for a proper purpose
(e)
The duty to exercise an independent judgement
(f)
The duty to act within their powers
The duty of care, skill and diligence
5.4.1. The business judgement rule
5.5.
Officers and Managers of the Company
5.5.1. Executive and Non-Executive Directors
5.5.1. The Chairman of the Board
5.5.2. The Chief Executive Officer/ Managing Director
5.5.3 The Secretary
6.6.
Shareholders acting in general meeting
Cases
(a) John Shaw and Sons (SALFORD) Ltd v Shaw [1935] 2 KB 113 (CA)
(b) Trinity Asset Management (Pty) Ltd v Investec Bank Ltd (2007) (5) SA 564 (W)
(c) Great Eastern Railway Co. v Turner (1872) L.R 8 Ch
(d) Bristol and West Building Society v Mothew [1998] Ch 1
(e) Robinson v Randfontein Estates Gold Mining Co Ltd 1921 AD 168
(f) DuPlessis NO v Phelps 1995 (4) SA 165 (C)
(g) Selangor United Rubber Estates Ltd v Cradock (No.3) [1968] 1. W.L.R
(h) Aberdeen Railway Co. v Blaikie Bros. (1854) 1 Macq. 461
(i) Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 (CA).
6. Shareholders and Company Meetings
6.1.
General meetings
6.2.
Convening a shareholders meeting
6.2.1. Persons who may convene a meeting a shareholder’s meeting
6.2.2. Instances when a company must hold a general meeting
6.2.3. Annual General Meeting
6.3.
Notice of meetings
6.3.1. Period of notice
6.3.2. Content of notice
6.4.
Conduct of and Proceedings at a shareholders meeting
6.4.1. Location of shareholders meetings
6.4.2. Attending and participating in a shareholders’ meeting
6.5.
Voting at a shareholders’ meeting
6.6.
Postponement and adjournment of meetings
6.7.
Shareholders resolutions
6.7.1. Proposing a resolution
6.7.2. Ordinary resolutions
6.7.3. Special resolutions
Cases
(a) John Shaw and Sons (SALFORD) Ltd v Shaw [1935] 2 KB 113 (CA)
(b) PNC Telecom plc. v Thomas [2004] 1 B.C.L.C. 88
(c) Re El Sombrero [1958] Ch. 900
(d) Umfolozi Co-operative Sugar Planters Ltd v St Lucia Sugar Farms (Pty) 1983 (1) SA
792 (N)
(e) Re Opera Photographic Ltd [1989] 1 W.L.R 634
(f) Re Woven Rugs Ltd [2002] 1. B.C.L.C 324
(g) Vectone Entertainment Holdings Ltd v South Entertainment Ltd [2004] 2 B.C.L.C 324
(h) Union Music Ltd v Watson [2003] 1.B.C.L.C 453
(i) Choppington Collieries Ltd v Johnson [1944] 1 All ER 762, CA
(j) Baillie v Oriental Telephone etc. Co. Ltd [1915] 1 Ch. 503, CA
(k) Byng v London Life Assurance Association Corporation [1990] Ch. 170, CA
(l) East v Bennet Bras Ltd [1911] 1 Ch. 163
(m) Salisbury Gold Mining Co. Ltd v Hathorn [1897] A.C. 268
(n) Re Horbury Bridge Coal, Iron, and Wagon Company (1879) LR 11 ChD 109
(o) Porteus v Kelly 1975 (1) SA 219 (W)
(p) Sammel v President Brand Gold Mining Co Ltd 1969 (3) SA 219 (W)
7. Abusive Transactions and Investor Protection
(a). Control structures
(b). Financial Assistance for the purchase of Shares
(c). Loans to corporate insiders
(d). Tunnelling
(e) Reckless and insolvent trading
7.1.
Corporate Democracy and Majority Rule
7.2.
Oppression of minority shareholders
7.2.1 Expropriation
7.2.2. Alteration of minority shareholder rights that is unfairly prejudicial and
discriminating against minority shareholders in favour of majority shareholders
7.2.3. Release of directors’ from their duty to act in good faith
7.3.
The Rule in Foss v Harbottle [the proper plaintiff rule]
7.3.1. The Derivative action
7.4.
Weak judicial systems
7.5.
The Indigenisation and Empowerment Act and its effect on securities trading
Cases
(a) Foss v Harbottle (1843) 67 ER 189
(b) Sammel v President Brand Gold Mining Co Ltd 1969 3 SA 629 (A)
(c) Regal (Hastings) Ltd v Gulliver [1967] 2 A.C 134
(d) Pavlides v Jensen [1956] Ch. 656
(e) Sidebottom v Kershaw, Leese & Co [1920] 1 Ch. 154, CA
(f) Estmanco (Kilner House) Ltd v Greater London Council [1982] 1 All ER 437
(g) MacDougall v Gardiner (1875) 1 ChD 13
(h) Cooks v Deeks [1916] 1 A.C 554
(i) Re HR Harmer Ltd [1959] 1 WLR 62 (CA)
(j) Re Five Minute Car Wash Service Ltd [1966] 1 WLR 745 (Ch).
8. Business Combinations and Fundamental Transactions
8.4.
Mergers and Acquisitions
7.2.
Merger consideration & types of mergers
(a) Traditional ‘pooling’ type merger
(b) Triangular type merger
(c) Reverse-triangular type merger
(d) Freeze-out type merger
7.3.
Disposal of all or a greater part of the company’s assets or undertaking
7.4.
Scheme of arrangement
7.5.
Regulation of fundamental transactions
8. Liquidation and Judicial Management
Recommended Reading
Statutes
1. The Companies Act [Cap 24:03]
2. Private Business Corporations Act [ 24:11]
3. The Zimbabwe Stock Exchange Act [ Cap 24:18]
3. Zimbabwe Stock Exchange Listing Requirements
4. Securities Act [Cap 24:25]
5. The Indigenisation and Empowerment Act [Cap 14:33]
Books
1. Charlesworth’s Company Law 7th Ed [Thomson-Sweet & Maxwell] -
Geoffrey
Morse
2. Contemporary Company [Juta] -
Farouk H I Cassim (Ed)
3. Gower and Davies’ Principles of Modern Company Law 7th Ed [Thomson- Sweet &
Maxwell]
- Paul L. Davies
4. Companies and Other Business Structures [Oxford Southern Africa]-
Dennis
Davies (Ed), Farouk H I Cassim (Ed)
5. Directing Public Companies: company law and the stakeholder society [Cavendish
Publishing] –Janice Dean
6. Critical Company Law [Routledge]- l e Talbot
7. Corporate Law 3rd Ed [Lexis Nexis Butterworths 2000]- Cilliers and Bernard
8. Modern Company Law For Competitive South African Economy [ Juta]:- Tshepo
Mongalo [Ed]
9. Corporate Governance, An Essential Guide For The South African Companies[
LexisNexis] :- Ramani Naidoo
Articles
1. Kathleen Emmarencia Van der Linde: - Aspects of Share Capital and Distribution to
Shareholders – PhD Thesis – University of South Africa
2. Artwel Gumbo:- the Ghost of the Ultra Vires rule in Zimbabwe 1995 ZLR
3. Sarah Anderson and John Cavanagh: - Top 2000 Companies: The Rise of Global
Corporate Power [Institute for Policy Studies 2000]
4. Michele K Havenga: - Directors‟ Fiduciary Duties under our Future Company Law
Regime – 9 South African Mercantile Law JOUNRAL 310, 312, 314 (1997)
5. Irene Marie Esser and J. J Du Plessis: - The Stakeholder Debate Directors Duties
(2007) 19 SA Merc LJ 346-363
6. Maria Vermaas: - Reform of the Law of Uncertified Securities in South African
Company Law [Modern Company Law for a Competitive South African Economy –
Tshepo Mongalo (Ed)]
7. Richard A Booth: - The Duty to Creditors Reconsidered – Filling a Much Needed Gap
in Corporation Law-Journal of Business and Technology Law 415
8. John Armour: - Share Capital and Creditor Protection; Efficient Rules for a Modern
Company Law – The Modern Law Review, Vol 6, No 3 (May 2000) 355-378
9. D. D Prentice: - Creditors Interests and Directors Duties –Oxford Journal of Legal
Studies Vol 10, No 2 (Summer 1990) 265-277
10. Laura Lin:- Shift of Fiduciary Duty Upon Insolvency: Proper Scope of Directors Duties
to Creditors- 46 Vand. L. Rev 1485, 1993
11. Tom Bostock and Maleson Stephen Jaques: - To whom are the Duties of Directors
Owed? [Australian Institute of Company Directors and Centre for Corporate Law and
Securities Regulation] – The University of Melbourne, Seminar 8 November 2008
12. Australian Institute of Company Directors and Centre for Corporate Law and
Securities Regulations: - Directors Duties; Recent Developments and their
Implications for Directors and Advisers 8 November 2000
13. Robin Hollington:- Oppression of Minority Shareholders- Reflections on Blisset v
Daniel (2007) 19 Denning Law Journal 5
14. Kathleen van der Linde:- The personal Liability of Directors for Corporate Fault- An
exploration (2008) 20 SA Merc LJ 439
15. Kathleen van der Linde:- Par –value shares or no par value shares; is the Question?
(2009) 19 SA Merc LJ 473
16. Kenneth K Mwenda:- Corporate Safeguards Against Oppression of Minority
Shareholders (1999) 11 SA Merc LJ 28
17. Mildred Benkink :- A Historical Overview of Directors’ Duty of Care and Skill: From
the 19th century to the Companies Bill 2007 (2008) 20 SA Merc LJ 380
18. Howard Sher:- Company Directors’ Duties and Responsibilities (2000) 13 Business
Law 129