IURI 311 EC

ENTREPRENEURIAL LAW
Faculty of Law

MOD compiled by: Prof N Killian, Adv S Serumaga-Zake and Mrs M Schoeman
Updated by: Ms Naeema Gabru
Copyright © 2022 edition. Review date 2023.
North-West University

No part of this MOD may be reproduced in any form or in any way without the written permission of the publishers
It all starts here
• Ranked in the top 5% of universities globally by the QS-rankings
• Contributes the second largest number of graduates annually to the labour market

Dit begin alles hier

• As een van die top 5% universiteite wêreldwyd deur die QS-ranglys aangewys
• Lewer jaarliks die tweede meeste graduandi aan die arbeidsmark

Gotlhe go simolola fano

• Re beilwe mo gare ga diyunibesiti tse 5% tse di kwa godimo go ya ka peo ya
maemo ya QS
• Ngwaga le ngwaga go abelwa palo ya bobedi ka bogolo ya badiri mo maketeng ya
badiri
 NORTH-WEST UNIVERSITY

Module information
Module code IURI 311

Module name Entrepreneurial Law

12 credits
Module credits This implies that you must spend a total of at least 120 hours to master the
outcomes of this module successfully.

Additional resources
or requirements to You will occasionally be required to have access to the internet during
complete module contact sessions.
successfully

Lecturer and contact information

Mafikeng Potchefstroom Vaal Triangle
Name of lecturer(s) Ms N. Mahlangu Ms N Gabru Ms Gabru &
Ms Mahlangu
Office telephone 018 389 2028 Will be announced Will be announced
E-mail address 44783760@nwu.ac.za Naeema.Gabru@nwu.ac.za Will be announced
Building and office
A14, G11 G5, O29 Will be announced
number
Consulting hours Tues 10:00 -14H00 (by Will be announced Will be announced
appointment only)
Fri 10:00 – 14H00

It is extremely important that you address any problems that you encounter with the course
material immediately. You are welcome to come and see us so that we can help you, as far as
possible.

Introduction
Welcome
Welcome to the module Entrepreneurial Law. As its name indicates this module is directed at
certain business structures that occur regularly in practice; the module is therefore offered from a
practice perspective and you will be able to apply its content to most practice-oriented occupations.

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Purpose of the module:
Entrepreneurial Law is a part of the law that everyone deals with on a daily basis. This is also
reflected in legal practice where legal advice and litigation often deal with entrepreneurial forms.
Furthermore, legislation exists that focuses on specific business structures. You should therefore
acquire thorough knowledge of the law relating to companies and other business structures in
order to practise law successfully. We further believe that you will find the course useful because
everyone exercising an occupation is involved in an enterprise in some way, whether as an owner,
stake-holder or employee. On completion of this module, you should be equipped with the
necessary knowledge of Entrepreneurial Law.
Entrepreneurial Law deals with the legal aspects of the different business structures and related
matters. In the module we concentrate on the different forms whereby an enterprise can be
operated. It consists of two common law forms and two statutory forms. The different forms that
commonly occur in practice are studied by means of lecture notes, the study guide, the prescribed
textbook, journal articles and court cases, with particular emphasis on their practical operation.
This subject area also possesses a distinctive terminology you must become familiar with.
In the operation of an enterprise different persons in various legal relationships come into contact
with one another. If an enterprise is run as a sole trader, such legal relationships will revolve
around relationships between such a person and third parties, including clients, suppliers,
landlords and so forth. However, when more than one person is involved in such an enterprise,
further legal relationships are established among such persons. To allow for such legal
relationships, common law as well as statutory entrepreneurial forms were developed

Teaching and learning in this module

The module will be presented by means of guided self-study. In guiding learning the focus will be
on general principles and concepts and not on detailed content. Detailed content will be made
available through the prescribed textbook, the study guide, journal articles, court cases and
legislation. This study guide, in conjunction with the lectures, should enable you to study
independently as far as possible and master the contents of this module.
During contact sessions, attention will be paid particularly to explaining concepts, establishing links
between different parts of the work, the acquisition of subject and general scientific skills. Learning
contents will be linked to the occupational world and the application value will be pointed out
throughout. Concepts and terms will be explained by examples and practical problem statements
will be discussed. Class attendance as well as well as participation during the contact sessions are
highly recommend in order to ensure that you have a proper understanding of the course content.
Learning guidance will consist of group work, formal lectures, case studies, etc. Through the study
guide you will be guided step-by-step through the learning contents. It is furthermore important that
you thoroughly study the learning outcomes in the study guide to ensure that you acquire the
necessary knowledge of and skills in this subject.

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Module outcomes
After completion of the module, the student will
demonstrate the following:
• integrated, well-rounded and practice
knowledge and understanding of, as well as
an ability to correctly evaluate and apply the
legal principles, concepts and processes
governing the law of partnerships, business
trusts, close corporations and companies.
• understanding of relevant knowledge within
the field of Entrepreneurial Law, and critical
evaluation of that knowledge and those
explanations typical within the field of the
entrepreneurial environment.
• ability to select, evaluate and apply a range
of different but appropriate rules and
scientific methods of enquiry to do focused
research and resolve problems that will
effect change within practice;
• ability to identify, analyse, critically reflect on
and address complex Entrepreneurial Law
problems and apply evidence-based
solutions with theory-driven arguments and
it’s application to different factual situations
with reference to the necessary authority;
• reflection of all values, ethical conduct and
justifiable decision making appropriate to the
practice of a real business environment
factual situations, specifically to the conduct
of trustees, partners, members and company
directors;
• management of a group in an unfamiliar
context in order to solve a contextual
problem, monitoring the progress of the
group and taking responsibility for task
outcomes and application of appropriate
resources where appropriate; and
• take full responsibility for own learning
needs, monitoring of own learning progress
and application of relevant learning
strategies and management of all resources
to successfully realize all outcomes of this
module.
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Assessment criteria
The outcomes have been reached when the
student can
• define the basic terminology and explain key
concepts, rules and principles of
Entrepreneurial Law;
• describe how Entrepreneurial Law is related
to other fields of law and legal practice;
• analyse recent developments in
Entrepreneurial Law;
• identify, contrast and critique different
theories underlying Entrepreneurial Law;
• evaluate and critique legislation, the
common law and case law relevant to
Entrepreneurial Law;
• prepare well-formulated written legal
opinions and present oral argument to
address problems pertaining to
Entrepreneurial Law;
• select the relevant statutory provisions and
common-law rules to solve problems in the
field of entrepreneurial law;
• demonstrate the ability to undertake
independent research when completing
assignments;
• identify and deconstruct legal problems;
• identify and apply legal rules and principles
pertaining to Entrepreneurial Law to those
problems;
• advise on or recommend solutions to
identified problems in line with any facts
given
• critically evaluate the ethical conduct of
trustees, partners, members, directors and
other stakeholders;
• analyse ethical conduct within the context of
corporate governance;
• participate in group assessment activities to
solve hypothetical problem statements;
• demonstrate the ability to function and take
responsibility within a group;
• demonstrate the application of effective
learning and monitoring strategies to ensure
learning progress towards outcome
attainment; and
• apply effective time management strategies to
complete and submit assignments on time.
Module plan:
Study Unit 1 Introduction and background - Legal personality, types of companies and
registration of companies
Study Unit 2 Trusts
Study Unit 3 Partnerships
Study Unit 4 Close Corporations
Study Unit 5 Companies
5.1 Corporate finance
5.2 Corporate Capital
5.3 Capacity and representation
5.4 Corporate Governance
5.5 Group of Companies
5.6 Business rescue
5.7 Remedies and enforcement
5.8 Winding-up Deregistration and Dissolution

Assessment
Requirements for successful completion of the module
You need a final module mark of at least 50% to pass the module. The final mark will be calculated
as follow:
• Participation mark: A minimum of 40% to obtain admission to examination
• Examination: A sub minimum of at least 45%. Please note that this is dependent on what
your participation mark is. For example, if your participation mark is 60% then you will need a
minimum of 45% in the exam to pass the module with a mark of 50%; if your participation
mark is 40% then you will need a minimum of 60% in the exam in order to pass the module
with a mark of 50%.
Assessment plan:
A) Assessment that will count towards your participation mark (Formative assessment)
Your participation mark will be calculated as follows:
• Two assessments that will count 30% each towards your participation mark, one of
which is a sit-down assessment and the other comprises of multiple choice questions
• Substantive written assignment to cover all study units that will count 40% towards
your participation mark.

You are responsible for your marks. It is therefore incumbent on you to ensure that you
are present in class and participate in all announced as well as unannounced activities so as
to ensure that you enter the exam with a respectable participation mark.

B) Examination (Summative assessment)

3 hour examination will be written at the end of the semester.

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C) Informal assessment that will support and give feedback on your learning
In contact sessions we will engage with the content of the module by means of activities such
as “minute papers”, polls/surveys, class tests, student presentations, reflection journals,
group discussions with feedback etc. These activities will support your learning and provide
you with immediate feedback on your learning.

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Action verbs
The following list contains all the possible verbs that may be used in this module to formulate
learning outcomes and all assessments. Every verb is accompanied by a description of what
(re)action is expected of you. Should an outcome (or assessment question) be to define a specific
concept, such as a fideicommissum, you are expected to communicate the definition as it is found
in a textbook. If you asked to describe what a fideicommissum is, you should use your own words,
giving evidence that you understand the concept fully and can apply it in context; an example
always comes in handy here.
Action words at the knowledge level
Remember means to retrieve relevant knowledge from long-term memory (LTM). You first have to
recognise or identify what you observe and then have to locate and retrieve knowledge in LTM that
is consistent with presented material (such as recognising and recalling the dates of important
events).
• Describe
A description merely requires that you give the relevant facts or characteristics, without any
discussion of such facts or characteristics. Nothing more than a clear and systematic
exposition of the concept is expected. You must stick to the relevant facts without
commenting.
For example: Describe the difference between a legacy and an inheritance.
• List / Name
Make a list only of the characteristics, facts or items as required, as with a description or a
definition.
For example: Name the ground rules for succession.
• Define
To define requires that you give the exact meaning of a concept. A brief, clear and specific
description must therefore be given, or the exact meaning of a term or concept which
pertains only to that term or concept and to no other must be stated.
For example: Define the concept fideicommissum.

Action words at the comprehension or insight level

Understand means to construct meaning from instructional messages (oral, written or graphic).
Interpret is to change from one form of representation (e.g. numerical) to another (e.g. verbal).
Exemplify is to give a specific example or illustration of something, while classify requires placing
something in a category. Infer is to draw logical conclusions from presented material, whereas
compare means to find similarities and differences between two concepts/events. Understanding
enables you to summarise, explain, interpret or put material in your own words, without necessarily
requiring application.
• Illustrate
To explain something with the help of examples.
Example: Illustrate the differences between a legacy and an inheritance.
• Explain
To explain you must give the reasons for a certain case, phenomenon or finding. Where
possible, examples must be used to elucidate the explanation.
Example: Explain what the result will be on dies cedit and dies venit if a bequest is
subject to a condition.

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 • Distinguish
Indicate the similarities or differences between two viewpoints or standpoints.
Example: Distinguish between a resolutive condition and a resolutive term with
reference to their influence on dies cedit and dies venit.
• Summarise
To summarise the most important information in a concise and systematic way.
Example: Summarise the formalities of a will.
• Compare
Identify the similarities and differences between the two or more matters that must be compared
and then give a systematic exposition, if necessary, in the form of a table: this is not merely a
mechanical description, but a thoughtful juxtaposition of the matters concerned.
Example: Compare common law estate massing and statutory estate massing.
Action words at the analytical level
Break complex compositions (e.g., a problem) down into the individual constituent parts of an overall
situation and determine how the parts relate to one another and to an overall structure or purpose.
Requires distinguishing relevant from irrelevant parts or important from unimportant parts and
determining how elements fit or function within a structure. Also determining a point of view, bias,
values or intent underpinning the material presented.
• Apply
Apply specific information or knowledge in a new situation by, e.g., indicating with reference
to an original example, how a particular method or strategy may be employed to solve a
problem.
Example: How can you make use of section 2(3) of the Wills Act 7 of 1953 to have a
will condoned that does not comply with the formalities of a will?
• Solve
To solve a given problem on the grounds of knowledge of a certain method / rule, etc. and insight
into the nature of the problem.
Example: How would you solve the problem where a will is invalid because it was not
signed by the testator and the end of it?
• Analyse / Problem statement / Advise
To analyse a problem, theme, argument, etc., it must, as it were, be taken apart and examined.
The different constituent elements or components must not only be identified, but a distinction
must also be made between the important and the less important elements or components and
commented on in your own words.
Examples:
Analyse: What was the problem with the will in the case of Ex Parte Davies 1957 3 SA 471
(N)?
Problem Statement / Advise: E leaves his farm to his son and the residue of his estate
to his wife. What will the position be if his son repudiates the farm? OR Advise the
wife of E with regard to the repudiated farm.
These questions deal with the situation where you are asked to advise a client on the legal
position or its course of action, and you must proceed as follows (marks awarded in
brackets):
(a) Identify the relevant legal problem or issues (10-15%).
(b) Describe the legal rules that are or may be relevant to these legal issues without
applying them at this stage. Describe the relevant legal theory and case law (30-40%).
(c) Apply the theory or rules as discussed to the particular facts of the problem (30-40%).
(d) Give advice or the solution to the problem. (10-15%).

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Action words at the evaluation level
Evaluate means to make judgements of viewpoints, statements, theories, claims, solutions to
problems or methods according to certain criteria, values, principles or standards which determine
the extent to which information is correct, accurate, effective, economical or satisfactory. The
judgment may be quantitative or qualitative and the criteria may be personal or standardised. You
must analyse a matter in its constituent parts or components, make a value judgment of each
component and integrate the results in an extensive, purposeful value judgement. You should
detect inconsistencies or fallacies within a process or product; determine the effectiveness of a
procedure as it is being implemented; detect inconsistencies between a product and external
criteria; determine whether a product has internal/external consistency, and detect the
appropriateness of a procedure for a given problem.
• Discuss
Discussion requires that you comment on a matter in your own words. Discussion often also
requires that two or more standpoints or possibilities be debated systematically, for example,
to examine, analyse and approach a case from different angles.
Example: Discuss the validity of a will which has been signed more than 20
centimetres after the concluding words of the will.
• Analyse
Take the problem, theme, argument or concept apart, as it were, and describe it. The
description must be done in the words of the person doing the analysis.
Example: Analyse the legal position of the fideicommissary regarding the
fideicommissary property before the fulfilment of the fideicommisary condition.
Action words at the synthesis level
Synthesising requires the integration of individual elements/parts in a (new) meaningful complex
whole (pattern/structure). The emphasis here is on innovation, originality and the ability to plan, co-
ordinate and formulate. It also means to come up with alternative hypotheses based on criteria;
devising a procedure for accomplishing some tasks, and inventing/designing a product/programme
• Evaluate
To evaluate means to make an assessment, appraisal or value judgement of a certain case,
argument or statement.
Example: Give a critical evaluation of the objections against the pactum
successorium.
• Give your opinion
Discuss one or more opinions on the matter or describe the status quo (e.g., the current legal
position) and then give your own substantiated opinion on the matter.
Example: What is your opinion regarding the fact that polygynous spouses are
entitled to inherit in terms of the Intestate Succession Act 81 of 1987?
• Criticise
Criticising requires that a statement, argument, approach, view, etc. is judged. In criticising
you point out certain positive or acceptable and negative or less acceptable concerns. Issues
that you agree with and issues that you have your doubts about are indicated together with
reasons. Criticising does not imply finding fault with something, but differing or agreeing with
certain views, arguments or standpoints in a substantiated manner and giving your own
opinion.
Criticism always takes place on the grounds of certain criteria, values and principles within a
certain context or against a certain background.
Example: Criticise the decision of the court in Kidwell v The Master 1983 1 SA 509 (E).

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Action words on the level of synthesis
Synthesising requires the integration of individual elements/parts in a (new) meaningful complex
whole (pattern/structure). The emphasis here is on innovation, originality and the ability to plan,
coordinate and formulate. It also means to come up with alternative hypotheses based on criteria;
devising a procedure for accomplishing some tasks, and inventing/designing a product/programme
• Give an overview
A large volume of knowledge must be condensed and presented in a logical and systematic
way, while retaining the essence.
Example: Give an overview of the position of the Hindu wife in the law of succession.
• Integrate
First make an analysis of the given concepts or opinions before its essential characteristics
are brought together into a single unit.
Example: On the basis of your knowledge of section 2(3) of the Wills Act 7 of 1953,
draw an application for condonation in the relevant court.
Structured questions
These questions consist of shorter questions. It may consist of a question/statement/set of facts
coupled with a number of choices. You must find the correct or incorrect choice according to the
question.
• Read the question and statements very carefully. Determine whether there are adjectives or
adverbs which qualify the statement. Then use the following method to answer this type of
question:
First study the relevant section in your study guide, textbook and other reading material.
• Answer the questions without your study guide/ textbook/ other literature:
a) by evaluating each of the alternative statements or choices against the main statement
or question;
b) if you cannot identify the correct answer immediately then proceed as follows:
▪ Read the question thoroughly again. Take note of the formulation - it will help you
with the following steps.
▪ Determine which alternatives are patently incorrect;
▪ Evaluate the remaining alternatives and determine which one should logically be
correct (in the legal science you are required to think analytically - sometimes it
means that two or more alternatives must be combined to arrive at the correct
conclusion. If more than one alternative is correct then you must choose the
composite alternative - 3+4 or 2+4+6.
▪ Check your answer with reference to the relevant literature.
Example: “A is my heir and if he cannot inherit, B is my heir”. This is an
example of:
1. Accrual.
2. Direct substitution.
3. Statutory substitution.
4. Modus.
5. Fideicommissum.
The correct answer is 2.

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Study material
Compulsory study material:
• Delport P New Entrepreneurial Law LexisNexis, Second Edition 2020
• Any other prescribed material as provided for in each of the study units.

Warning against plagiarism

Plagiarism is a serious offence and you should familiarise yourself with the plagiarism policy of the
NWU. http://library.nwu.ac.za/copyright-and-plagiarism
Please refer to the Policy on Academic Integrity which is found on the following website:
http://www.nwu.ac.za/sites/www.nwu.ac.za/files/files/i-governance-management/policy/2P-
2.4.3.2_Academic%20integrity_e.pdf

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Study units

1 Introduction to Entrepreneurial Law, Legal personality, types of

companies and registration of companies

Recommended time to master this study unit outcome: 5 hour

Learning outcomes
After engaging with the materials and activities in this study unit you should be able to:
• Understand and discuss the development of Entrepreneurial law
• analyse the concept of legal personality;
• determine under which circumstances the corporate veil may be lifted;
• distinguish between different kinds of companies and set out the characteristics of every kind of
company;
• explain what the incorporation of a company entails;
• explain the legal nature of the memorandum of incorporation;
• consider the enforceability of pre-incorporation contracts;
• analyse the concept of legal personality;
• determine under which circumstances the corporate veil may be lifted;
• distinguish between different kinds of companies and set out the characteristics of every kind of
company;
• explain what the incorporation of a company entails;
• explain the legal nature of the memorandum of incorporation;
• consider the enforceability of pre-incorporation contracts;

2 Business Trust
Recommended time to master this study section outcome: 15 hours
Learning outcomes
After engaging with the materials and activities in this study unit you should be able to:
• define and explain the concept and legal nature of the trust;
• name and explain the position of the founder, the trustee and trust beneficiaries;
• explain the founding requirements of a trust;
• describe the different types of trusts;
• discuss the rights and obligations that adhere to each of the positions;
• describe the method of amendment and termination of the trust; and
• describe the benefits of a trust in comparison with other forms of enterprise and apply them
to a set of facts.

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3 Partnership
Recommended time to master this study section outcome: 10 hours
Learning outcomes
After engaging with the materials and activities in this study unit you should be able to:
• briefly discuss the different forms of enterprise;
• define the concept of “partnership”;
• explain the term “legal nature”;
• name and discuss the general characteristics of partnerships;
• explain the essential elements of the partnership contract;
• name and discuss the essentialia and naturalia of a partnership agreement;
• discuss and apply the implications of the incidentalia;
• name the rights and duties of partners and explain each one;
• know what the representative capacity of a partner is;
• discuss the ways in which the authority of a partner can originate and apply such knowledge
to a set of facts;
• discuss the accountability of a partnership due to an unlawful action of a partner;
• explain litigation against the partnership and the partners during the lifetime and after
dissolution of the partnership;
• discuss the grounds for dissolution of a partnership; and
• explain the general consequences of a dissolution of the partnership

4 Close Corporation
Recommended time to master this study unit outcome: 15 hours
Learning outcomes
After engaging with the materials and activities in this study unit you should be able to:
• explain the reasons for the establishment of a new form of enterprise;
• identify the close corporation as a form of enterprise;
• discuss what the founding statement is as a founding document;
• explain the distinctive characteristics of a close corporation;
• define the membership requirements, explain the nature of the member’s interest and explain
and apply the methods of acquisition to a practical situation;
• know what the transfer and utilisation of member’s interest entail;
• define the association agreement and distinguish it from other agreements;
• compare the management method of the close corporation with the management method of
a partnership and a company;
• describe the internal relations in a corporation;
• analyse the representative capacity of a member on behalf of the CC; and
• identify the cases in which members are personally liable for the debts of a CC

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5 Companies
Recommended time to master this study unit outcome: 32 hours
Learning outcomes
After engaging with the materials and activities in this study unit you should be able to:

5.1 Corporate finance

• distinguish between the legal nature of a share and a debt instrument;
• distinguish between different classes of shares;
• distinguish between authorised, issued and unissued shares;

5.2 Corporate capital

• distinguish between the legal nature of a share and a debt instrument;
• distinguish between different classes of shares;
• distinguish between authorised, issued and unissued shares;
• explain what an option is;
• explain what a pre-emptive right is;
• explain the application of the solvency and liquidity test;
• explain what a distribution is and what the requirements for distributions are;
• explain under which conditions shares may be repurchased;
• explain under which circumstances financial aid may be given for the purchase of shares;
• distinguish between the beneficial holder of securities and a nominee;
• discuss the registration and transfer of securities;
• distinguish between certificated and uncertificated securities;
• discuss the public offerings of company securities;
• explain the purpose and content of a prospectus.

5.3 Capacity and representation

• analyse the legal capacity, as well as limitations to the legal capacity, of a company;
• explain the doctrine of constructive knowledge;
• define and apply the Turquand rule;
• advise third parties and shareholders on what they may do if a company contracts outside its
capacity.

5.4 Corporate governance

• explain how to convene shareholders’ meetings;
• explain under which circumstances shareholders’ meetings may be postponed and
adjourned;
• explain the role of a proxy;
• explain the purpose of an annual general meeting
• distinguish between ordinary and special resolutions.
• distinguish between different kinds of directors;
• explain which persons are ineligible, and which persons are disqualified from being
appointed as a director;
• discuss applications to declare persons delinquent or under probation;
• discuss the dismissal of directors;

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 • discuss the composition and purpose of board committees and the audit committee;
• discuss the duties and responsibilities of directors;
• solve problem questions regarding directors’ duty of care, skill and diligence and their
fiduciary duties;
• formulate and apply the business judgement test;
• determine the possible liability of directors;
• explain the concept of corporate governance.

5.5 Groups of companies

• set out the legal principles that govern groups of companies

5.6 Business rescue

• be able to define ‘business rescue’
• be able to discuss the commencement of business rescue
• be able to understand and critically discuss the business rescue process
• be able to understand and critically discuss the business rescue plan

5.7 Remedies and enforcement

• discuss the statutory derivative action and apply the principles to a case study;
• discuss relief from oppressive or prejudicial conduct and apply the principles to a case study;
• discuss dissenting shareholders’ appraisal rights and apply the principles to a case study.
• the general consequences of a dissolution of the partnership

5.8 Winding-up, Deregistration and Dissolution

• discuss the statutory provisions relating to winding-up, deregistration and dissolution and
apply to a case study
• the general consequences of a dissolution of the partnership, trust etc.

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