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The Doctrine Of Diclosure (Part 1)

The doctrine of disclosure remains one of the fundamental doctrines of South African company law. In Britain, the country from which South ...

The doctrine of disclosure remains one of the fundamental doctrines of South African company law. In Britain, the country from which South African and Zimbabean law was adopted ,the practical feasibiity of this doctrine has been seriously questioned while in other countries various reservations have been raised regarding some of its consequencies.


THE CRUX AND IMPORTANCE OF THE DOCTRINE
The crux of the principle lies therein that the requirement of disclosure of prescribed information provides protection for certain interested parties and that disclosire tends to regulate corporate conduct better than imposition of regulatory and prescriptive provisions.

- There is thus, in fact, a functional connection between requiring disclosure and dispensing with rigid legislative controls on company conduct.
- It is on this basis that typically uncompljicated process of incorporation of Zimbabwean and South African company law is founded.
- The person forming a company secure its incorporation by registering its constitutional documents, the memorandum and the articles of association with the companys registration office where these documents are then available for public inspection.
The Doctrine Of Diclosure (Part 1)
OPERATION OF THE DOCTRINE
- In terms of the doctrine the disclosure requirements are of a continous nature and apply to the company on every phase of its existence on incorporation until its dissolution or deregistration.
- The history at every company and especially at the public company is chronicled in the files kept for public inspection by the Registrar of companies.
- Whenever the public is invited to subscribe for its shares or debentures the company must issue a prospectus containing information.
- Continous disclosure of the lates information in regard to company by means of publication of annual financial statements and interim reports serves to round off the operation of disclosure.

CLASSES WHOSE INTERESTS ARE SAFEGUARDED
- as far as the effects of the operation of the doctrine of disclosure is concerned several classes can be distinguished whose interests are safeguarded or benefited by the pubication of information relating to the company mainly potential shareholder or investors.

MEMORANDUM OF ASSOCIATION
- deals with the relationship between the company and the outside world.
- Defines the limits/ extent of the company’s powers.
- What the company may or may not do.
- Is the constitution of the company.
- One of the most important document that has to be lodged with the Registrar.
- No certificate of incorporation may be issued if there is absence of the memorandum.

Section 8 – deals with the memorandum of association.

Drafting of the memorandum should ensure that the following clauses are contained in the memorandum.
Name claue
Objects clause
Limitation of liability clause
Capital clause
Subscription clause

NAMES CLAUSE
- must have the word “limit” as if it is a public company.
- If it is a private company then it should have the word (private) as the penultimate word eg
- This is to warn those doing business with the company that liability of its members is limited.
- In choosing the name for his company, the promoter must comply with provision of section 24.
- He may not choose a name that is identical of another company
- May not choose a misleading name that is likely to cause offensive, suggestive of blasphemy or indecency or undesirable for any other reason.
- Or that which suggests that the company is under state patronage.
- Discretion of the registrar to refuse a name is very wide indeed.
- Promoter must therefore apply a name reservation so that if he has chosen an unacceptable name then it can be changed.

CASE: BON MARCHE (PVT) LTD V LEES BON MARCHE AND OTHERS
Bon Marche [Harare sued le Bon Marche] in Bulawayo arguing that the name used was similar to his own and deceived customers.However it was held by Dumbutschena CJ ,as he was then that there ought to be evidence of intention to deceive not a mere likelihood.

- this brings us to the delict of Passing-off which essentially was an unfair practice and in this case one person misrepresents that his business is that of another.
- This is unfair in that it misleads customers and clients with some prejudicial consequencies.
- A company may change its name in terms of section 25.
- A special resolution is required before the registrar can enter a new name.
- Company is under obligation in terms of section 133 to display its name at all times and its registered office.
- Failure to do so is a punishable offence.