LLM / Department of Mercantile Law / For a considerable period of time the primary goal of corporations was seen as being to increase the wealth of the investors (shareholders). Priority was given to shareholders’ profit maximisation at the very expense of stakeholders` interests in corporate governance. Stakeholders` interests were seen to be falling outside the range of the needs and objectives of the corporate world. However, in contemporary times, schools of thought have emerged which proposed that the corporations should not solely focus on maximising profit for the benefit of shareholders but should consider the interests of stakeholders in the management of their affairs. This issue has attracted enormous debate and arguments have been brought forward to support the view that those in management positions should consider stakeholders` interests in the corporate governance. However, there is no unanimity among scholars on what should be the right approach. It is against this backdrop that the study therefore assesses how companies are practically run in order to determine whether the interests of stakeholders are considered in corporate governance as much as they should. This dissertation explores, through doctrinal and empirical methods, the conflicting theories and existing debates on corporate governance and to show that it is for the good of the company as an entity that there be equal recognition and treatment of the two groups of the competing interests in corporate operations. The research employed the doctrinal research approach in order to evaluate the positions advocated by the different schools of thought as well as to give a comparative analysis of the position of the law in cognate jurisdictions on this matter. The empirical research approach, through questionnaires, was used to collect qualitative data from different stakeholders of different categories of chosen companies in order to ascertain from the perspective and actual experiences of stakeholders the extent to which companies consider the interests of stakeholders. The research established that, in the main, companies do not consider the interests of stakeholders and in cases where they do, the interests of shareholders are still dominant to those of stakeholders. Recommendations are made from inferences drawn from the study on how to guarantee an enhanced protection of the stakeholders’ interests in the corporate scheme. / NRF

This thesis critically examines the statutory unfair prejudice remedy provided for in section 163 of the Companies Act 71 of 2008 (‘the Act’). Section 163 is evaluated against its equivalents in England, Australia and Canada. Section 163 is considered against its predecessors to determine whether problems associated with the formulation and application of its predecessors have now been eradicated. It is argued that although it is important to ensure that company legislation is able to provide protection of an international standard to shareholders to be able to attract capital investment in a competitive market, one has to be cautious of slavishly following legislative trends in foreign jurisdictions. The South African legislature indiscriminately incorporated only parts of the Canadian unfair prejudice remedy in section 163. This approach also resulted, amongst others, in the introduction of foreign concepts. The legislature further failed to take cognisance of the unique historical developments relating to the unfair prejudice remedy in South Africa. This has led to the reintroduction of problems experienced with previous formulations of the statutory unfair prejudice remedy in South Africa and left certain problems relating to the interpretation and application of the statutory unfair prejudice remedy unresolved. Consideration is also given to the interrelationship between section 163 and some of the statutory remedies in the Act. Section 163 is also assessed in the context of the Constitution of the Republic of South Africa, 1996. In conclusion, recommendations for possible legislative amendments are made and an interpretational framework for the interpretation and application of the statutory unfair prejudice remedy in section 163 is provided. / Mercantile Law / LL. D. (Mercantile Law)

It is in the area of the regulation of a company's share capital and distributions to shareholders that the inherent conflict between creditors and shareholders, and the fragile balance among shareholders internally, intersect. The share capital of a company underlies its corporate structure and represents not only its initial own funds from which creditors can be paid, but also the relative equity interests of the shareholders. The balance between shareholders can be disturbed by capital reorganisations through increase, reduction or variation of share capital or through disproportionate contributions by, or distributions to, shareholders. Share repurchases are particularly risky in this regard. Creditor interests are affected when their prior right to payment is endangered by distributions to shareholders. This study analyses the South African Law relating to share capital and distributions against the background of a comparative study of the laws of England, New Zealand, Delaware and California, as well as the provisions of the American Model Business Corporations Act. Two main approaches to creditor protection are evident. The capital maintenance doctrine, which is followed in England and Delaware, protects creditors by emphasising the notional share capital of the company as a limit on distributions. In contrast, the solvency and liquidity approach focuses on the net assets of the company and on its ability to pay its debts. New Zealand, California and the Model Business Corporations Act represent this approach. Regulatory responses to shareholder protection range from insistence on compliance with procedural requirements to minimal statutory intervention in the internal affairs of companies, instead relying on general principles of fairness and good faith. There is little correlation between a particular system's approach to creditor protection on the one hand, and to shareholder protection on the other. England, New Zealand and South Africa prescribe specific formalities, while the American approach is more relaxed. South Africa is a hybrid system. Its transition from capital maintenance to solvency and liquidity has been incomplete and its protection of equity interests is relatively unsophisticated. A number of recommendations are made for an effective and coherent approach that will safeguard the interests of creditors and shareholders alike. / School: Law / LL.D.

The Companies Act of 71 of 2008 makes a number of important changes to the rules relating to capital maintenance. In line with the objectives of the Companies Act of 71 of 2008, section 44 of the Act has removed the prohibition on the provision of financial assistance by a company which was contained under the previous section 38 of the Companies Act 61 of 1973. Despite the repeal of the prohibition, a transaction which involves the provision of financial assistance by a company for the acquisition of or subscription of its own securities still needs to be effected in accordance with the requirements and conditions that are provided under the Act and Memorandum of Incorporation. To explore the new developments, within this study, the provision of financial assistance in terms of section 44 of the Companies Act of 2008 is, therefore, analysed in detail. On the other hand, the UK Companies Act of 2006 repealed the prohibition on the giving of financial assistance by private companies in most circumstances. It, however, retained the prohibition to public companies only because of the requirements of the Second Company Law Directive (77/91/EEC). This study also explores the rules of financial assistance by a company under the UK Companies Acts in detail. Though the source of financial assistance by a company both in South Africa and in English Company laws is rooted in the English decision of the Trevor v Whitworth case, currently these countries have adopted what is deemed appropriate and significant in their own countries. This study, therefore, examines and compares the rules governing the provision of financial assistance by a company in the company laws of these two countries. / Mercantile Law / LL.M. (Commercial law)

It is in the area of the regulation of a company's share capital and distributions to shareholders that the inherent conflict between creditors and shareholders, and the fragile balance among shareholders internally, intersect. The share capital of a company underlies its corporate structure and represents not only its initial own funds from which creditors can be paid, but also the relative equity interests of the shareholders. The balance between shareholders can be disturbed by capital reorganisations through increase, reduction or variation of share capital or through disproportionate contributions by, or distributions to, shareholders. Share repurchases are particularly risky in this regard. Creditor interests are affected when their prior right to payment is endangered by distributions to shareholders. This study analyses the South African Law relating to share capital and distributions against the background of a comparative study of the laws of England, New Zealand, Delaware and California, as well as the provisions of the American Model Business Corporations Act. Two main approaches to creditor protection are evident. The capital maintenance doctrine, which is followed in England and Delaware, protects creditors by emphasising the notional share capital of the company as a limit on distributions. In contrast, the solvency and liquidity approach focuses on the net assets of the company and on its ability to pay its debts. New Zealand, California and the Model Business Corporations Act represent this approach. Regulatory responses to shareholder protection range from insistence on compliance with procedural requirements to minimal statutory intervention in the internal affairs of companies, instead relying on general principles of fairness and good faith. There is little correlation between a particular system's approach to creditor protection on the one hand, and to shareholder protection on the other. England, New Zealand and South Africa prescribe specific formalities, while the American approach is more relaxed. South Africa is a hybrid system. Its transition from capital maintenance to solvency and liquidity has been incomplete and its protection of equity interests is relatively unsophisticated. A number of recommendations are made for an effective and coherent approach that will safeguard the interests of creditors and shareholders alike. / School: Law / LL.D.

The Companies Act of 71 of 2008 makes a number of important changes to the rules relating to capital maintenance. In line with the objectives of the Companies Act of 71 of 2008, section 44 of the Act has removed the prohibition on the provision of financial assistance by a company which was contained under the previous section 38 of the Companies Act 61 of 1973. Despite the repeal of the prohibition, a transaction which involves the provision of financial assistance by a company for the acquisition of or subscription of its own securities still needs to be effected in accordance with the requirements and conditions that are provided under the Act and Memorandum of Incorporation. To explore the new developments, within this study, the provision of financial assistance in terms of section 44 of the Companies Act of 2008 is, therefore, analysed in detail. On the other hand, the UK Companies Act of 2006 repealed the prohibition on the giving of financial assistance by private companies in most circumstances. It, however, retained the prohibition to public companies only because of the requirements of the Second Company Law Directive (77/91/EEC). This study also explores the rules of financial assistance by a company under the UK Companies Acts in detail. Though the source of financial assistance by a company both in South Africa and in English Company laws is rooted in the English decision of the Trevor v Whitworth case, currently these countries have adopted what is deemed appropriate and significant in their own countries. This study, therefore, examines and compares the rules governing the provision of financial assistance by a company in the company laws of these two countries. / Mercantile Law / LL.M. (Commercial law)

This thesis considers the typical structure and requirements of a traditional securitisation scheme in South Africa. The models used in other jurisdictions cannot be applied unchanged in South Africa. South African securitisation structures make use of a security special purpose vehicle (SPV), because of uncertainties about the provisions of the Companies Act 61 of 1973 relating to the trustee for debenture-holders. An evaluation of the functioning of a security SPV leads to the conclusion that a trustee for debenture-holders should still be appointed within the security SPV structure to represent the interests of the investors. The trust for debenture-holders can be a true trust. The use of general notarial bonds over claims, pledges of claims and fiduciary security cession is examined to determine the effectiveness of each one during securitisation. Aspects of several Acts, Notices and other regulatory measures are considered where they are relevant to securitisation. Of specific importance is the Exemption Notice Relating to Securitisation Schemes, 2008. The Notice requires that both rights and obligations of the originator must be transferred to the SPV. The requirement that the obligations of the originator must be transferred leads to the conclusion that the Notice requires a transfer of claims by means of cession and a transfer of duties by means of delegation. For several reasons, delegation is not a suitable method of transfer during securitisation. Foremost among these reasons is that delegation is a form of novation, which means that the claims cease to exist and are replaced with new claims between the debtors and the SPV. Security rights that were accessory to these claims will then also cease to exist. The amendment to the Notice is recommended so that transfer of claims by means of cession will suffice for compliance with the Notice. The South African courts‘ approach to simulated transactions is evaluated to determine the possibility that the sale of the assets to the SPV may be viewed as a simulated transaction. This thesis evaluates the provisions in insolvency law that could be raised to impeach the sale of the assets in the event of the originator‘s insolvency. The risk of avoidance of the transaction on either ground is small. / Mercentile Law / L.L.D. (Mercentile Law)

South African company law has provided for the rescue of financially distressed companies since 1926 when the statutory procedure of judicial management was introduced by the Companies Act 46 of 1926. Unfortunately, judicial management has never been regarded as a successful corporate rescue procedure and for most of its existence it has been severely criticised on many grounds. The Companies Act 61 of 1973 that replaced the Companies Act 46 of 1926 did very little to improve this situation and judicial management remained underutilised. As a result, the Companies Act 71 of 2008 now introduces two newly-created corporate rescue procedures in the form of business rescue proceedings and the compromise with creditors. This study analyses judicial management and the new corporate rescue procedures to establish whether the identified weaknesses of judicial management have been adequately and effectively addressed in the new procedures. A comparative study with similar procedures in England and Germany is undertaken to determine whether the South African legislature has delivered on its promise to create a system of corporate rescue that will meet the needs of a modern South African economy. Several weaknesses in the new procedures are identified and a number of recommendations are made to improve the relevant provisions and to assist in providing South African company law with an efficient and acceptable corporate rescue regime. / Mercentile Law / LLD (Mercentile Law)

South African company law is currently the object of comprehensive review. One o f the areas under scrutiny is that of corporate governance. Control over management is vital in the interests of the company itself, its shareholders and its creditors. Effective accountability should be balanced against the need to allow those who manage a certain measure of freedom and discretion in the exercise of their function. Company directors are subject to various duties. This thesis concentrates on their fiduciary obligation. It is suggested that this sui generis obligation is owed to the company as a separate entity. Interests of other groups may sometimes merit con­ sideration. Against the background o f a com parative investigation, a "corporate opportunity" is defined as any property or economic opportunity to which the com­ pany has a claim. South African law protects a company’s claim to an opportunity if it is in the company’s line of business and if the company has justifiably been relying upon the director(s) to acquire it or to assist in its acquisition for the company. The application of established fiduciary principles suffice to resolve corporate opportunity matters. Essentially the application o f these rules amount to a determination whether the director has complied with his fundamental duty to act in the company’s best interests. There seems to be no need for a separate doctrine of corporate opportunities.' A director should only be absolved from liability on account of the company’s inability to pursue an opportunity or its rejection by the company if there was no real conflict of interest. The appropriation of corporate opportunities should not be ratifiable, both because the ratification constitutes a fraud on the minority, and because the decision to ratify cannot be regarded as being in the interests of the company. The relationship between the appropriation of corporate opportunities, misuse of confidential information and competition is investigated. These aspects fre­ quently overlap, but should be distinguished because their bases, and accordingly their appropriate remedies, may differ. Effective control may benefit by a restatement of directors’ fiduciary duties in the Companies Act. To this end certain amendments to the Act are recommended. / Mercantile Law / LLD

Thesis (LLM (Mercantile Law))--University of Stellenbosch, 2009. / The worldwide increase of corporate failures on the scale of Enron and WorldCom has sparked a renewed international trend of corporate governance review. With the external company auditor blamed at least in part for many corporate failures, corporate governance reform also necessitates a review of the statutory regulation of the company auditor. In particular, the lack of auditor independence when auditing clients has been under the legislator’s spotlight. The problems associated with unregulated or poorly regulated auditors are well illustrated by the activities of auditing giant Arthur Andersen. In the US, the Sarbanes-Oxley Act has been promulgated in reaction to corporate failures, imposing many new legislative restrictions on the auditor. The UK has a more tempered, selfregulatory approach. South Africa, following international trends with its recently promulgated Auditing Profession Act and Corporate Laws Amendment Act, has also greatly increased the regulation of auditor independence. The question is now whether these new restrictions in the wake of corporate failures have been the right approach with which to prevent future failures and to provide adequate protection to shareholders. Although the general legislative increase in auditor awareness is welcomed, the efficacy of several provisions in South African legislation can be questioned. Widespread reform has taken place in the appointment and remuneration of the auditor, which now has to be independently determined by the audit committee. In particular, South Africa’s new regulation of non-audit services, and the lack of refined regulation on compulsory auditor rotation as well as the cross-employment of auditors by clients, needs a critical discussion. It is submitted that the discretion of a well-regulated audit committee, combined with increased disclosure and transparency, should be enough to regulate most of the key aspects of auditor independence. Care should be taken to not overlegislate in haste to reform. South Africa needs a flexible and customised approach in this regard.