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Legal Status and Juristic personality - Coggle Diagram
Legal Status and Juristic personality
Concepts
Legal Status
For a company: able to enter into a contract; has a separate legal personality
Juristic personality
Company is a juristic person but not a natural person as cant vote/get married
Natural person can vote and get married
Principles of agency
Agency: when an agent acts on behalf of another person, the latter is often left vulnerable to abuse
Because a juristic person has no physical body/presence, it relies on human agents to do it bidding on its behlaf
Agency can be used to determine whether the principal (e.g. the juristic person) is liable on a contract entered into by the agent w a 3rd party
Business Rescue
Business is in destress and applies for business rescue procedures and then a business rescue officer is tasked w saving the company
Termination
Company is only terminated when
Deregistered w Companies and Intellectual Property Commission (CIPC)
Liquidated- i.e. unable to meet its debt; no longer a going on concern
When incorporating a business must consider
No. of persons involved
Management and ownership
size of the business
tax implications
Fiduciary Law
Agency: when an agent acts on behalf of another person, the latter is often left vulnerable to abuse, especially relevant to juristic persons as juristic persons have no physical presence and therefore rely on human agents to do its bidding on its behalf
This law thus protects the vulnerable party
E.g. of fiduciaries include partners in an unincorporated partnership, trustees of a trust, directors of a company, and a member of a close corporation
Basically all agents (ppl in a persons in a position of trust)
From Latin fiducia meaning trust
As soon as you are put into a position of trust in any capacity, a fiduciary relationship exists
e.g. doctor and patient
Partner in a partnership
Trustee of a trust
Director of a company
Member of a Close Corporation
A fiduciary holds a legal/ ethical relationship of trust w one/ more parties
Typcially a fiduciary prudently takes care of money or other asset for another person
Must act in the best interest of the company, act in good faith, be honest
Fiduciary held to a standard of conduct and trust above that of a stranger or of a casual business person
When a party knowlingly accepts a fiduciary duty on behalf of another party- they are required to act in the best interests of another party
He/she/it must avoid self dealing or conflicts of interests in which the potential benefit to the fiduciary is in conflict w what is best for the person who trusts them
Beneficiary: a person/ business/ bank/ stock brokerage who has the power and obligation to act for another under circumstances which require total trust, good faith and honesty
Identifying a fiduciary relationship
There must be the scope for the exercise of some dicretion/power
That power/ dicretion can be used unilaterally so as to affect the beneficiary's legal/ practical interests; i.e only the fiduciary can affect the benficiary, not the other way around
A peculiar vulnerability to the exercise of that discretion/power i.e. someone can suffer coz of your power
NOTE: While agency is not a necessary element of the existence of a fiduciary relationship, the fact that agency exists indicates that a fiduciary relationship exists
The existence of a fiduciary relationship/lack there of is not needed to determine that there is agency as agency is determined by a contract of mandate between P and A
Duties of a fiduciary
Duty to act in good faith
Must at all times be open and honest in his dealings
Must avoid a conflict of interest
Must hand over any profit made in the course of carrying out the mandate/fulfilling duties
Must disclose relevant/ pertinent info
Duty to account
Must keep the beneficiary informed of progress
Must keep his own property separate
Must maintain proper records of dealings and transactions
Must account for any transactions concluded during mandate
Principles of agency
Agency is a contract between the Principal and the agent whereby the Principal authorises the agent to contract/ negotiate a contract on the Principal's bealf with the 3rd party
Agency: when an agent acts on behalf of another person, the latter is often left vulnerable to abuse, especially relevant to juristic persons as juristic persons have no physical presence and therefore rely on human agents to do its bidding on its behalf
Agent can be
Empowered
Commercial advantages
Do not need to enter a contract personally
May authorise a representative
Necessary for commercial juristic entities to function
Unempowered
Agent gone rogue
Duties
Duties of the agent
To be honest and show good faith (fiduciary duty)
No secret profits
No conflict of interests
No delegation of authority
No disclosure of info
To perform the mandate
Regulated by Financial Advisory and Intermediary Services Act (FAIS)
To exercies due care (fiduciary duty)
To act in accordance w the Principal's instrucitons; if they dont its breach of fiduciary duty
To allow inspection of books and to render an account to Principal
Duties of the principal
To pay the agent the agreed remuneration if the mandate is substantially performed
To reimburse the agent for expenses properly incurred
To identify the agent for all losses he/she has suffered as a result of the execution of the mandate
But these costs must be approved/ authorised
Agents must disclose that they are acting as an agent according to FAIS ( Financial Advisory and Intermediary Services Act )
Requirements
For a person to act as a principal under Common Law
Be in exisistence
Have contractual capacity (to enter into a 3rd contract)
E.g. be 18+; be of sound mind
Of an agent
Have at least limited contractual capacity (ltd menaing cant enter into just any contract)
Have authority to perform
Make it clear to the 3rd party that s/he acts for a principal but does not need to disclose Principal's name
Failure to disclose the exsistence of a principal can result in agent incurring liability on the contract
Authority
Agent acted w authority
the parties of the contract are P and 3rd party (contract is NOT between A and 3rd party)
Agent incurs no rights/ obligations based on contract w 3rd party
Agent acted w/o authority/ beyond mandate
Agent then might be liable himself; cannot bind the P
Agent could be liable based on warranty of authority (e.g. 3rd party can claim damages if harmed)
If P liable based on estoppel (prevented from going back on their word) the agent may in turn be liable to the P
Aquiring authority as an agent
Express Authority (e.g. Power of attorney- special/general)
P expressly authorises agent
Verbally/ in writing
Exact scope of authority given
Implied authority
Implied via circumstances
Created by A coz of their position/necessity (e.g. always at meetings)
Use Hypothetical bystander Test only if authority is being questioned
If a 3rd party who knew nothing of the business came and observed and assumed that you have authority, therefore implied authority
Ratification
Agent acts w/o authority but P elects to ratify the action after the fact
Express/ implied authority
Only possible if the P exists at the time contract was entered into by A
Ostensible authority/ apparent authority
No express/implied authorty but PRINCIPAL creates the impression that the person does in fact have authority
P w be bound by the contract coz of the false impression created
False impression w lead to P estopped (prevented/barred) from replying on the true facts as a defence
P creates the impression
Requirements for 3rd party to rely ostensible authority
Representation made by words/ conduct by agent
Representation made/ permitted by the P
Representation made to the contracting 3rd party
Such that is could reasonably be expected to mislead the 3rd party (objective test used: would a reasonable person be misled)
3rd party must have contracted to his/her detriment
No actual/ express authority
Case Law
Makete v Vodacom (Pty) Ltd
Termination of an A's authority in either of the following cases
Mutual consent of P and A
Revocation (cancel) by P (even if agency is described as irrevocable form of authority/ transaction under Common Law)
P held liable for damages
Renunciation (resignation) by A but A may be liable for damages
Due performance of respective obligations
Expiry of period of time for which the authority was granted
Death of wither the P or A (if P is a natural person yes; if P is a company and is liquidated, it is handed over to administration)
Insanity of the P (only if P is a natural person as companies cant go insane)
Insolvency of the P
Application to business entities
Partnerships
No perpetual succession
No P.
Are agents of each other
can enter into transactions on behalf of each other whether expressly said or not
Unlimited liability for all partners (i.e. all held liable)
Unlimited liability for all partners (i.e. all held liable)
Mutual mandate in partnerships
Company
Directors act as A's of the company
CC
Members of the CC act as A's of the CC
Trusts
Trustee acts as agent on behalf of the trust
Juristic persons
Corporation- derived from latin word corpus
Cases that further developed this law
The British Bubble Act of 1720 (regulated stock owning)
Limited Liabiility Act of 1844
Saloman v Saloman & Co:
Principle: A company is a separate legal personality and has ltd liability
Brief overview of case: Saloman made a company and made his wife & children the directors.
Company was liquidated and creditors wanted to sue Saloman saying that it was only his family as directors but they couldnt coz of the ltd liability benefit of a company
Definition
A collection of individuals united into one body
Having perpetual succession
- Any individuals that can leave the company and the company won't dissolve. Note that partnerships are different in this regard
under an artificial form
(can't touch a company but a comp. can acquire assets and employ ppl) and
vested by policy of the law (companies act 2008) w the capacity of acting (which can be ltd by its MOI) in several respects as an individual, particularly of taking and granting property of contracting obligations and of suing and being sued and of exercising a variety of political rights
(own prpoerty, data privacy, patents etc)
more or less extensive according to the design of its institution or the powers conferred upon it
Common Law Juristic persons
Possible under common law to be recognised as a jurisitic person w/o registering
Requirements:
must have a clear and lawful purpose
Like how SAICA has purpose to regulate the CA profession (SAICA is not enabled/created by any statute/ not registered but is recognised as a juristic person)
Must have a form of constitution- aka rules/laws/ code of conduct/ internal structure
must exist independent of change of membership
Registering
Why not register
not making a profit
don't want a regulator/ SARS to get involved
don't collect money
just an association
Why register
Provides certainty of company's existence
Gives separate legal personality and perpetual succession
Ltd liability
Formal recognition from banks and other institutions
Regulatory protection (regulator provides protection); credibility
Common Law JP is recog by the courts
Note that these Juristic persons do not have separate legal personality
Company as a juristic person
Recognised as a separate legal person in terms of Companies Act s19
From the date and time that the incorporation of a company is registered, the company:
is a jursitic person, which exists continuously (perpetual succession) until its name is removed from the companies register (in accordance w the Comp. act)
Has all of the legal powers and capacity of an individual
EXCEPT to the extent that:
a juristic person is incapable of exercising any such power or having any such capacity
i.e. cannot get married , adopted , emancipated)
OR Unless the company's MOI [memorandum of incorporation] provides otherwise
Separate Juristic Personality (key features)
Limited liability
Assets are the exclusive property of the company
The company must go to court ITSELF when a wrong was committed against it. The SHs can't sue on behalf of the company
this prevents multiple chaotic lawsuits
(Foss v Harbottle: the "proper plantiff rule")
Company can contract w its members
Company can acquire rights and duties separate from its members
Owners/SHs have no automatic right to manage
Profits belong to the company
Statutory Juristic persons
Two ways
Enter via specific legislation
e.g Eskom (Electricity Act 42 of 1922)
these JP's are NOT registered as companies
Registration in terms if a generally enabling statute:
CC Act of 1984
Companies Act 71 of 2008
Note that these enabling pieces of law that allows the company to come into existence provides regulations for those companies
Statutory JP recog by legilation
aka Juristic persons created by legislation/statute
Principles of delict
Nature
Is a CIVIL wrong, NOT a criminal wrong
Therefore we say Plantiff v Defendant
Civil liability is compensation
Committing a delict creates an obligation to compensate
Criminal compensation is punishment
Based on the Roman Law branch of law (aka the law of obligations), a person could incur a civil obligation to compensate another in 3 ways
Entering into an agreement enforceable by law (contract)
Committing a wrong against another (delict) unless is a crime
Forming quasi contract (i.e. unjustified erichment)
Definition
A delict refers to a wrongful and blameworthy conduct which causes harm to a person
Blameworthy: the perpetrator must have been at fault
Wrongful: must not be unreasonable to impose liability in the circumstances
Elements of delict
Fault.blameworthiness
Wrongfulness
Causation (factual/ legal)
Must be a causal link between delict and loss
Loss
financial/ reputational / intangible, non-financial loss (non-patrimonial)