INTERNATIONAL TRAINING COLLEGE - LINGUA

Towards Educational Excellence

NCHE Reg. No: R0014
NQA Accreditation No: 000095

DEPARTMENT OF BUSINESS AND MANAGEMENT

MARKING KEY: ASSIGNMENT 1

Lecturer: MR W. MUSHONGA Due Date: 12 MARCH 2020

QUALIFICATION : Diploma in Accounting & Finance (NQF Level 6)

:Bachelor’s Degree in Business Administration (NQF Level 7)

MODULE : Company Law (NQF 6)

ASSIGNMENT : 1

TOTAL MARKS: 30 marks

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Question 1

a). Explain in detail the effects of incorporation of a company under Company Law?

(20 marks)

RESPONSE:

✓ When a company is incorporated, it is a separate legal entity with its own rights and
liabilities distinct from those of its shareholders.
✓ A company is a legal entity in its own right, separate from that of its owners.
Accordingly, the company can enter into contracts and own assets in its own name, and
assets are held by the company.
✓ Once the company is incorporated, it has several characteristics, one of which is
perpetual succession.
✓ In this, the company does not depend on its existence on the members or directors.
✓ Death of the members or directors do not affect the legal existence of the company.
✓ Secondly, the company itself owns property, not the members or directors. It can
dispose of the assets as it deems fit.
✓ Again, the company enjoys limitation of liability. This means that the members will not
be liable for debts of the company and creditors may not seek contributions from
individuals within the company to pay them, even if the company is insolvent.
✓ The company as a legal person will sue if a wrong is done to it. Individual shareholders
cannot generally sue in such circumstances and the decision as to whether the
company will sue or not rests with the members acting collectively in general meeting or
with the board of directors.
✓ Separation of ownership and management between the company and the members is
another effect of incorporation.
✓ Because the company, a s a commercial enterprise, is distinct from its members as
owners, it must have its own management in the form of a board of directors.
✓ On borrowing powers, the company has implied power to borrow for trading purposes
and to give security for loans, unless expressly prohibited from doing so by the
Memorandum of Association.
[2 marks for each clearly explained point]

b). Identify and clearly explain the essential components of the Articles and Memorandum of
Association. (10 marks)
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✓ Every company is required to have a written constitution in the form of two documents.
✓ The Memorandum of association defines the essential components of the structure of
the company partly for the information of those who do business with it.
✓ It states the proposed company’s name, the objects, the powers and capital and the
situation of its registered office.
✓ It must also contain a clause stating that liability of members is limited.
✓ The purpose of MOA is to enable persons who wish to invest in or deal with company
to ascertain what its name is, whether it is a public company, what its objects are,
whether the liability of its members is limited and what share capital it is authorised to
issue.
✓ The second document is the Articles of association which is the code of internal
regulations applicable to the company and its members in their dealings with each
other.
✓ The AOA regulate the rights of the members of the company amongst themselves and
determine the manner in which business of the company shall be conducted.

✓ The AOA deal with matters such as the appointment and powers of directors, general
meetings of the company, and the voting rights of shareholders may also be found in
the AOA.

✓ The MOA and AOA constitute a contract between the company and each other.

[1 mark for each clearly explained point]

End of assignment.

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