ASSIGNMENT 1

With reference to the Namibia Company Act, No. 28 of 2004, Discuss the circumstances
under which a company may be wound up and who may make up an application to court
for winding up the company.

A company is a legal entity made up of an association of people, should they be natural, legal or
a mixture of both carrying on a commercial enterprise for profit or nonprofit purposes.

The winding up or liquidation of a Company means the termination of the legal existence of a
Company by stopping its business, collecting its assets and distributing the assets among
creditors and shareholders in the manner laid down in the Act

A company may be wound up by the court, by voluntarily. A voluntary winding-up of a

company may be a creditors or a member.

The circumstances under which a company may be wound up by Court.

Special Resolution of the Company: If the Company has, by special resolution resolved that
the Company be wound up by court.

Not Commencing or Suspending the Company: If the Company does not commence its
business within a year from its incorporation, or suspends its business for a whole year. The
court will not direct winding up under this clause if satisfactory reasons are given for a delay or
suspension. Reduction of Members: If the number of members is reduced in the case of a
public Company to below seven and in the case of a private Company to below two.

Shares lost: 75 per cent of the issued share capital of the company has been lost or has become
useless for the business of the company
Inability to pay debts: If the Company is unable to pay its debts. When company is deemed
unable to pay debts 

 Section 350. (1) A company or body corporate is deemed to be unable to pay its debts if :

 (a) a creditor, by cession or otherwise, to whom the company is indebted in a sum not
less than the prescribed amount then due

 (i)    has served on the company, by leaving the same at its registered office, a demand
requiring the company to pay the sum so due; or 

 (ii)    in the case of anybody corporate not incorporated under this Act, has served that
demand by leaving it at its main office or delivering it to the secretary or some director,
manager or principal officer of that body corporate or in some other manner as the Court
may direct, and the company or body corporate has for 15 days thereafter neglected to pay
the sum, or to secure or compound for it to the reasonable satisfaction of the creditor; or 

 (b)    any process issued on a judgment, decree or order of any court in favor of a creditor
of the company is returned by the sheriff or the messenger with an endorsement that not
sufficient disposable property has been found to satisfy the judgment, decree or order or that
any disposable property found did not on sale satisfy the process; or 

 (c)    it is proved to the satisfaction of the Court that the company is unable to pay its
debts. 

 (2) In determining for the purpose of subsection (1) whether a company is unable to pay
its debts, the Court must also take into account the contingent and prospective liabilities of
the company

The just and equitable clause: If the Tribunal is of Opinion that is just and equitable that the
Company should be wound up. The interpretation of just and equitable’ clause depends on the
facts of each case.
The court may only order winding up of a company if –

(1) when the object for which it was incorporated has substantially failed or it is impossible to
carry on the business of the company except at a loss or the existing and probable assets are
inadequate to meet the liabilities

(2) when the majority of the shareholders are using their powers unfairly or

(3) where there is a deadlock in the management of the company, or

(4) where the public interest is likely to be reduced,

(5) when the company was forme4 to carry out fraudulent or illegal business,

(6) when the company is able and does not carry on any business.

Other factors that may lead to a company winding may be, if it commits the following
offences;

Breach of confidence, false statements, reckless conduct, non-compliance to the company act
and hindering the administration of the Act.
An application for winding-up of company may be maybe;

An application to the Court for the winding-up of a company may be made -

(a) by the company;

(b) by one or more of its creditors, including contingent or prospective creditors;

(c) by one or more of its members;

(d) by any person irrespective of whether his or her name has been entered in the register of
members or not;

(e) In the case of any company being wound up voluntarily, by the Master or any creditor or
member of that company; or
(f) In the case of the discharge of a provisional judicial management order by the provisional
judicial manager of the company.

(g) A member of a company is not entitled to present an application for the winding-up of that
company unless that member has been registered as a member in the register of members for a
period of at least six months immediately before the date of the application or the shares that
member holds have devolved on that member through the death of a former holder.
ASSIGNMENT 2

Discuss the criminal liability of a corporate organization and its directors. Explain the
principle of piercing the corporate veil. What are the duties of a director to the company?.

Corporate crime is just that. A crime committed by any person through the venue of his
employment that benefits the business. This means that if an employee does something illegal to
benefit the organization, the corporation itself can be held liable for the employee's actions.

An employee can get into a corporate crime pickle in the following way:

 Bribery
 False claims
 Embezzlement
 Insider trading
 Violation of environmental laws

Bribery involves offering to take or taking money from someone to influence them to do
something they would not ordinarily do, like offering a city official money to approve a building
permit.

When a company makes false claims, they are making statements that are not truthful to
customers. These claims are especially damaging in advertising. Imagine ordering a low fat
shake day after day only to find out the company falsely claimed its calories and fat to be much
lower than they really are. Repeated purchase of this product under these false pretenses could
potentially lead to health problems, weight gain or even death.

One of the most devastating corporate criminal acts is embezzlement because it hits the pockets
of innocent people. This is when money or other valuables are converted into personal or
corporate gain by a person whom others trust.

Let's say the purchasing agent at a company accepts kickbacks from a vendor in order to ensure
their continued business. These kickbacks may be in the form of money or gifts, like vacations or
even jewelry. The employee, by accepting the kickbacks, is personally benefiting from the
vendor on the side. This is illegal because assets are being withheld from the company and only
benefiting these two individuals.

Insider trading is a very serious crime. It involves buying and selling stocks based on non-
public information. This is such a serious crime because those in a position of trust hold
information that the general public does not have access to. With the information, only a certain
few can enter into lucrative stock purchases or sales earlier and stand to gain more.

Our natural surroundings are something most people hold precious. But some companies do not
feel the same way. Violating environmental laws by polluting the air and water or destroying
trees and wildlife holds devastating effects on everyone's health and welfare. A chemical spill
due to negligence in the ocean, for example, can kill seabirds and destroy their natural habitat for
years to come. It should be pretty clear that someone will be in trouble if this sort of thing
happens.

Now that we learned a few ways corporate crime occurs, let's see what liability a corporation
holds to crime.

Corporate Criminal Liability

Corporate liability simply means the extent to which a corporation is responsible for the actions
of its employees such as directors. There are two ways in which a corporation can be liable:

 Strict liability
 Vicarious liability

Strict liability is compulsory when an act causes damage, injury or death, even in the absence of
criminal intent. This is used as a way of forbidding the act from occurring again.
The principle of piercing the corporate veil

Corporation is considered to be a separate entity from its shareholders, it has a separate

legal personality and distinguished before the law, it is a fundamental principal of corporate
law and, in fact, the whole company law orbiting around it therefore, if the corporation faces
a dispute, it will stand separately in its legal capacity from its shareholders.

When the corporation is unable to pay the creditors or fulfill payments, such creditors shall,
usually, try to find a party to obtain the same targeting the shareholders. In this situation,
creditors will spare no efforts to convince the court to lift the corporate veil and ignore its
corporation form. In other words, in certain circumstances, the shareholders had been sued
for negligence and debts and had been held liable for the company’s creditors, this action is
known as “piercing the corporate veil or lifting the corporate veil.

The doctrine goes back to the Roman law which is the origin of the civil law system, and
when the House of Lords in England rendered the judgment of Salomon vs. Salomon
& Co (1897), it was considered under the English legal system in the second half of
the nineteenth century. Salomon vs. Salomon case is considered to be the sparkle and the
infrastructure of “piercing the corporate veil” doctrine in the UK where the house of lords
established the rule that the corporate stands as a separate legal entity from its shareholders,
and, as a result of that, the direction of modern company law was and is still determined
much depending on the aforementioned precedent.

The main reason for protecting the separate legal personality of a company is to encourage
investment and increase trade transactions via eliminating the concerns of entrepreneurs of
the commercial risks and liabilities that may occur in business, on the other hand, piercing
the corporate veil mainly intents to insure justice and the protection of creditors rights and
preventing shareholders or directors from escaping their obligations.

The duties of a director to the company

The directors of a company are in charge of the management of the business on a day-to-day
basis. They must make operational decisions to ensure the company meets its strategic
objectives. Directors’ works as an agents of the company appointed by the shareholders. A
key part of that is to participate in board meetings to make decisions that fulfil the
company’s obligations.  

The Companies Act 2004 puts ‘meat on the bones’ of the duties of directors by outlining the
statutory duties that apply to all company directors

Firstly, to exercise reasonable skill, care and diligence, company directors must exercise
skill, care and diligence in regard to the functions they carry out on behalf of the business.
Failure to act with a certain degree of competence for the benefit of others could give rise to
negligence claims to compensate the company for mistakes the directors make. Secondly, to
promote the company’s success, a company director must act in a way that demonstrates
good faith in the business and promotes the company’s success for the shareholders as a
whole. This duty relates to the purpose of the company as set out in the company’s
constitution (the Memorandum of Association and Articles of Association). For example, if
the company is set up for charitable purposes then the directors are obliged to work for the
benefit of others. Thirdly, to act within their powers, company directors are given certain
powers to enable them to manage the company. They must use those powers in the best
interests of the company as set out in the company’s constitution and not to further their
own narrow interests.  
In addition, directors must exercise independent judgment when making decisions and not
subordinate their power to the will of others. While directors can seek professional advice,
they should exercise their own judgment when deciding whether to follow it. Moreover,
company directors must not accept a benefit from third parties, company directors must
work to promote the success of the business and cannot accept a benefit (a bribe) from a
third party that may cause them to do or not do something. Offers of corporate hospitality or
gifts should be regarded with caution as benefits provided to a director with the intention of
winning new business could be considered a bribe.

Avoid conflicts of interest, it is a legal obligation for company directors to avoid conflicts of
interest that relate to situations and transactions the company is involved in. Each director
has a personal responsibility to avoid circumstances where they have or could have a direct
or indirect interest that conflicts with the interests of the company. Non-compliance is seen
as a serious breach of director duties and criminal action could follow. Most importantly, to
disclose any interest in a proposed transaction or arrangement, If the director of a business
has an interest in a proposed transaction or arrangement then it must be declared to all
members of the board either at a board meeting or in writing. For example, if the company
is considering using a new supplier and a director is also on the board of the potential
supplier that must be disclosed.
ASSIGNMENT 3

What are the advantage and disadvantages of a sole trader and discuss them? What type of
business would you recommend your friend to establish and give reasons to support your
answer?

Sole traders benefit from the following advantages:

 Simple to set up and operate – to start up a sole trading business, you do not need a lot
of requirements as types other business ownerships.
 You retain complete control of your assets and business decisions.
 Fewer reporting requirements- it does not have many reporting requirements.
 Any losses incurred by your business activities may be offset against other income, such
as your investment income or wages (subject to certain conditions).
 Good control – Sole trader maintain full control of their business. Running it how
they please without the interference of others.

 Profit retention – Sole traders retain all the profits of their business.

 Data is kept private – Information about sole traders is kept private, unlike that of
limited companies which is necessarily made public after registration with
Companies House.
  The business owner will become a specialist – Often a small business, sole
traders can offer a more personal service with local roots and ties. This can be more
appealing to potential customers in the local community.

 Personal – Because there is no need to confer with other decision makers, sole
traders can make decisions quickly and act on them swiftly, providing for the needs
of their customers.

Disadvantages of a sole trader

Just like any other form of business, being a sole trader can also have its disadvantages.

 Unlimited Liability – sole traders are not seen as a separate entity by the law.
Therefore, they are subject to unlimited liability. This means if the business gets
into debt, the business owner is liable. In the worst case, this may mean a person
risks their home, personal savings and any other assets they have both in and
outside of the business. All your personal assets are at risk if things go wrong.
 Finance – sole traders often find it difficult to raise finance to fund their business.
They may struggle with expansion in the future.

 Reverse economies of scale – sole traders will be unable to take advantage of

economies of scale in the same way as limited companies and larger corporations,
who can afford to buy in bulk. This might mean that they have to charge higher
prices for their products or services in order to cover the costs.

 Decision making – all decisions must be made by the sole trader. There is no room
for help by others. So the success or failure of the business rests on one person.
  Little opportunity for tax planning – you can’t split business profits or losses with
family members and you are personally liable to pay tax on all the income from the
business.

I would recommend my friend to establish a sole trader is a business structure that is incredibly
popular for small businesses as its ease of set up and full control, makes it an appealing business
structure.

The following are the reasons that come from setting up a business as a sole trader;

Be your own boss

The main benefit of being a sole trader is that you are your own boss and you can dictate the
direction of the business. As a self-employed sole trader, you will be able to run your business as
you wish. This is perhaps one of the biggest reasons why people leave employment to start their
own business. A sole trader has more freedom with decision making compared to a partnership
structure, for example. A partnership business structure will most likely involve making joint
decisions and sharing the ownership and the direction of the business.

Keep all the profits

Another benefit of being a sole trader is that you get to keep all the profits after tax on your
business. If you were to form a partnership then you would have to share these. Also, if you were
to form a limited company, you may need to share the profits of your business with any investors
or shareholders.
Easy to set up

The process of setting up as a sole trader is much easier and more straightforward than setting up
a limited company. Becoming a sole trader is easy because all you have to do is inform the
register.

Low start-up costs

Setting up as a sole trader does not incur any costs. Alternatively, if you were to set up a limited
company you would be required to pay to form a company with Companies House. Therefore if
you are starting a business, depending on what it is, you may have lower start-up costs going for
the sole trader option.

Maximum privacy

A limited company has to register with Companies House and provide information which is then
on public record. A limited company owner will have to provide business details, and details on
the directors and shareholders. This reduces the privacy of the business. As a sole trader, you
don’t have to register your business with Companies House, allowing you to keep your business
private.

Easy to change the business structure

If you want to start small and later expand, operating as a sole trader allows you to do that. You
can easily change your business structure. For example, if your business starts to see an
increase in its income, you may find it more tax efficient to start running your business as a
limited company. You can do this easily. It’s not a complicated process, allowing you to keep an
open mind about future opportunities.