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Corporate Law Corporate Capacity, Agency & The Corporate Law Corporate Capacity, Agency & The

Corporate Law Corporate Capacity, Agency & The - PowerPoint Presentation

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Uploaded On 2018-10-08

Corporate Law Corporate Capacity, Agency & The - PPT Presentation

Turquand Rule Understand the ultra vires doctrine amp the Turquand Rule Understand and explain the legal capacity of a company and the authority of directors to represent the company Learning Outcomes ID: 686848

act company directors ultra company act ultra directors vires doctrine person section authority documents dealing acts perform knowledge shareholders

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Slide1

Corporate Law

Corporate Capacity, Agency & The

Turquand

RuleSlide2

Understand the ultra

vires

doctrine & the Turquand RuleUnderstand and explain the legal capacity of a company and the authority of directors to represent the company

Learning OutcomesSlide3

To protect investors and shareholders

What is

ultra vires?Literally “outside the powers”In common law ultra vires

acts were void

Company therefore not boundCompanies Act of 2008 abolishes doctrine of ultra vires externally but it is preserved internallySection 20 (1)

The

Ultra

Vires

DoctrineSlide4

An act (except if contra to Act) is not void only because:

Company did not have capacity to perform the act because of limit or restriction imposed by MOI

Directors did not have authority to perform the act

Section 20(1)Slide5

Ultra vires

doctrine exists internally within company insofar as

Directors will be liable for breach of fiduciary dutyShareholders entitled to restrain company from entering into or performing an ultra vires

contract

See Section 20(1) (b) (i) and (ii)Internal applicationSlide6

Doctrine does not apply

Shareholders may ratify any acts by company or directors that were

ultra viresShareholders have claim for damages against any person who causes company to act

ultra

vires (Sec 20(6)External ApplicationSlide7

Persons doing business with a company are deemed to have knowledge of a companies constitutional documents as they are public documents open for inspection

2008 Act abolishes doctrine of constructive notice

No one is deemed to have knowledge of company documents merely because documents filed or open for inspection

Doctrine of Constructive NoticeSlide8

However:

Person deemed to have knowledge of any provision in a MOI if Notice of Incorporation (or amendment) has drawn attention to that provision

See Sec 19(5)Slide9

What is it?

Essentially, that anyone dealing with a company can presume that the person they are dealing with has complied with internal requirements and is entitled to act accordingly

2008 Act formalises the rule in section 20(7)Provides protection to third parties dealing with companyDirectors, shareholders etc may not rely on it internally

The

Turquand RuleSlide10

(7) A person dealing with a company in good faith, other than a director,

prescribed officer

or shareholder of the company, is entitled to presume that the company, in making any decision in the exercise of its powers, has complied with all of the formal and procedural

requirements in terms of this Act, its Memorandum of Incorporation and

any rules of the company unless, in the circumstances, the person knew or reasonably ought to have known of any failure by the company to comply with any such requirement.

Section 20(7)Slide11

Company cannot act on its own

It acts through its directors

Business of copany must be managed under direction of the board of directors (section 66(1)Board has authority to exercise all powers and perform all functions of the company except as specifically prohibited by Act or MOI

Representation & authority of directorsSlide12

Board can delegate its powers to individual directors or managers

Contractual arrangement

Law of agencyRepresentation of company