Business Entities Exam Preparation

BUSINESS ENTITIES IN NAMIBIA
1. Introduction
The aim of this course is the following:
(1) to enable you to advise your client on the different forms of business entities in
Namibia in order to allow him to establish the correct entity;
(2) to advise your client on the pros and cons of each entity;
(3) to advise your client on the process of registration;
(4) to familiarise you, as legal practitioner, with the statutory provisions;
(5) to advise your client on the different possibilities when they are in financial
difficulties, including the process of liquidation and winding-up;
(6) to advise your client on the importance of deregistration.
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2. Forms of Business Entities in Namibia
Business can be conducted in Namibia in various forms. These include public and private
companies, close corporations, partnerships, sole proprietors and business trust. These are
the basic forms for conducting business. There are also the possibilities of opening a branch
of a foreign company or entering into a joint venture (similar to a partnership).
When a client comes to you and wants to start a business, there are certain issues that you
must consider / questions you have to ask before you can advise the client. These are:
(1) Is there any legislative measure prohibiting what your client wants to do? For
example, does the Company Act or the Close Corporations Act prohibit what your
client intends on doing?
(2) How many persons would be involved? This can be determined by the complexity of
the business you want to enter into and the amount of capital needed to achieve the
business objective.
(3) Does the client want to run/ manage the business alone?
(4) What is separate legal identity and what are the consequences thereof? Ask if the
client is concerned about separate legal identity. How important is it for your client
to protect their assets?
(5) What are the formalities and costs involved in each entity? Does your client want to
start up a business fast and with little capital, or do they want to take their time and
invest a lot?
(6) What is the tax liability of each?
(7) Does your client have a profit motive? If not, you obviously won’t advise him to
form a partnership. Look rather at a section 21-company (not for profit company).
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3. The Sole Trader
3.1. Introduction
Sole traders are informal business ventures with no prescribed registration procedures. It is
most suitable for individuals who want to conduct a small business where he or she alone
has the sole control.
3.2. Pros and Cons
There are various pros and cons of this type of entity:
PROS CONS
1. Simplicity 1. No separate legal identity
2. Cheaper 2. Personal liability
3. No auditors 3. Limited finance
4. No annual financial statements 4. Limited skills and expertise
5. Easy decision-making 5. No perpetual succession
6. Profit yours only 6. Sliding tax scale
7. Easily terminated 7. Insolvency affects business
8. Sliding tax scale
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4. The Partnership
4.1. Introduction
Entering into a partnership is also very informal. There are no registration requirements for
partnerships. It is based upon a contract entered into between two or more persons. This
contract can either be oral or in writing.
4.2. Pros and cons
PROS CONS
1. Potential to raise more capital 1. No separate legal identity
2. Shared/spread liability 2. No perpetual succession
3. Flexibility in terms of profit-sharing 3. Insolvency affects business
4. More skills and knowledge 4. Profit-sharing
5. No registration, only agreements 5. 2 – 20 partners only
6. Simplicity 6. Everyone can manage
7. Tax
8. Fiduciary relationship
4.3. Types of Partnership
There are three different types of partnerships:

(1) the general/ordinary partnership: all partners are jointly and severally liable for the
debts of the partnership.
(2) the anonymous/sleeping partnership: the anonymous partner is unknown to the
public and is liable towards his partners only for his pro-rata share of the debts or
the eventual shortfall.
(3) the commanditarian partnership: the partner en commendite is purely a financial
participant with a restricted liability, similar to a shareholder in a company. This
partner is also unknown to the public. He shares in the profits and losses of the
partnership, but his liability is limited to his specific contribution.
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4.4. Essentialia of a partnership agreement
A partnership agreement does not need to be registered. It can be in writing or concluded

orally. A partnership agreement must certain essentials:
(a) Every partner must contribute something. This contribution can either be money,
skill, property or labour.
(b) The partners must have a profit motive.
(c) There must be a joint benefit for all partners.
(d) It must be a legitimate contract. It must, therefore, meet all the requirements of a
contract in terms of the substantive law of contract.
4.5. Rights of Partners
Each partner has certain rights in terms of the common law. These are the right to inspect
the books of the partnership and the right to demand answers for certain actions.
4.6. Legal identity of partnerships
A partnership does not create separate legal identity. However, certain legislative measures
treat partnerships as such. So, for example, R14(2) of the High Court Rules states that
partnerships may sue and be sued in its own name. R40(3) of the Magistrates Court Rules
states that, where judgment is against a firm, the partnership property shall first be exhausted,
so far as it is known to the judgment creditor, before the judgment is executed against the separate
property of the partners.
The definition of “debtor” for purposes of insolvency means either a person or partnership.1 In
Strydom v Courtega 1979 (2) SA 20 (TPD) the court stated that a partnership is a quasi-persona. The
court held that, because a partnership is treated as a debtor in terms or the Insolvency Act, separate
legal identity is given to a partnership. Is this correct? Isn’t the exception merely there for
convenience sake?
1
Section 1 of the Insolvency Act 24 of 1936, sv “debtor”.
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4.7. Relationship between the partners
Husband1 Wife3
Partner A Partner B Partner C
Husband2
If Wife3 has debt that she can’t pay, the creditors can look to her husband, Partner C. If he
cannot pay the debt, the whole partnership can be affected.
Amongst the partners, however, there is a fiduciary relationship of trust. This means that,
inter partes, the partners must act in good faith. There are certain fiduciary duties:
(1) Act in the best interest of the partnership / avoid conflict of interest.
(2) Act only with a mandate.
(3) Disclose fully all your actions.
(4) If an obligation is imposed upon a partner, he or she must act upon it.
The problem with Wife3 spending incurring debts that could potentially hold the
partnership accountable, is the question of how one can argue that her spending is a breach
of good faith? Can you say that a spouse is also bound by the fiduciary duty? Earlier we
said it is only applicable inter partes.
4.8. Remuneration of the partners
Each partner is entitled to a share of the profits, made at whatever interval. The managing
partner is entitled to more profits, but would not be an employee. What about the other
partners, can they be employees?
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4.9. Advising your client on the choice between partnerships and sole traders
This will depend on whether your client wants to operate alone or not. Your client needs a
legitimate and reliable partner to work with. If the client wants to manage the business
alone, it is better to do so as a sole trader. With a partnership, you could appoint a
managing partner. Remember, the rights of partners are exposed – each partner has a right
to inspect the books and the right to demand answers from the managing partner.
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5. Close corporations
5.1. Introduction
Close corporations are regulated by the Close Corporation Act of 1988. It is a hybrid form of
business that aims at reconciling certain characteristics of a partnership with that of a (Pty)
Ltd. The internal relations between the members of a CC resembles that of the partners in a
partnership, while a CC’s external relations resembles that of a company. Owing to the
complexity of the Companies Act it was argued that many of its provisions were
inadvertently proving burdensome and costly to the small business enterprise.
A close corporation is a separate legal entity and continues to exist as such, regardless of
any changes in its membership. A Close Corporation has all the capacities and powers of a
natural person of full capacity in so far as a juristic person is capable of having such capacity
or of exercising such powers2. In principle every member is an agent of the corporation for
the purposes of the business of the corporation. Complicated company law doctrines, such
as the doctrine of disclosure, the doctrine of constructive notice and the ultra vires doctrine,
have no application.
Only natural persons may be members, with the exception of a testamentary trust which
may hold member’s interest in a Close Corporation.3 Instead of differentiating between
shareholders and directors, a Close Corporation has only members, who are, unless
otherwise provided in an association agreement or subject to some legal disability, 4 all
entitled to participate in the running of the Close Corporation’s business, and shall have
equal rights in regard to the power to represent the corporation in the carrying on of its
business.5
2
Section 2(4) of Act 26 of 1988
3
Section 29 of Act 26 of 1988
4
Such as an unrehabilitated insolvent or a minor, except a minor over the age of 18 years, in respect of whom his
guardian has lodged a written consent to participate in the management of the corporation. Section 47 of Act 26
of 1988
5
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2 Formation and juristic personality of close corporations
(1) Any one or more persons, not exceeding ten, who qualify for membership of a close corporation in terms
of this Act, may form a close corporation and secure its incorporation by complying with the
requirements of this Act in respect of the registration of its founding statement referred to in section 12.
(2) A corporation formed in accordance with the provisions of this Act is on registration in terms of those
provisions a juristic person and continues, subject to the provisions of this Act, to exist as a juristic
person notwithstanding changes in its membership until it is in terms of this Act deregistered or
dissolved.
(3) Subject to the provisions of this Act, the members of a corporation shall not merely by reason of their
membership be liable for the liabilities or obligations of the corporation.
(4) A corporation shall have the capacity and powers of a natural person of full capacity in so far as a
juristic person is capable of having such capacity or of exercising such powers.
5.2. Pros and Cons
PROS CONS
1. Separate legal identity 1. Maximum of ten members
2. Perpetual succession 2. Only natural persons can be members
3. Easier to establish than a company 3. Has less business clout.6
4. Easier to manage than a company
5. Cheaper to incorporate
5.3. Formation
When registering a CC, the following steps need to be followed:
(a) Get a Power of Attorney from your client.

(b) Reserve a name on the CC8 form. You need to give three alternative names and
state the object of the CC. The CC8 must be printed out on yellow paper and
stamped with a N$50.00 revenue stamp. Two copies are made of the CC8 and when
you submit the CC8, one copy is stamped and returned to you with a serial number
written on. This number is used for all enquiries. The name will be rejected if it
already exists, if it is misleading or if it is offensive. It takes about two to three
weeks for the Registrar to approve the name. The reservation is valid for two
months.
6
In the minds of business people, a company has more financial control.
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(c) Obtain the consent of an accounting officer. This can be done as soon as you have a
permanent name for the CC.
(d) Lodge a CC1 Founding Statement with the names of the members, each member’s
contribution, addresses, etc. It must be printed on blue paper. The CC1 must also
contain the objects of the CC and the percentage of shares of each member (the
membership contribution). This form needs to be stamped with N$100.00 revenue
stamps. All this will cost about N$450.00. The founding statement, which is akin to
the memorandum and articles of association of a company, is a far simpler
document. The principal business must be stated, as well as every member’s
contribution of either money, property (incorporated or corporeal), or services
rendered in connection with and for the purposes of formation and incorporation of
the corporation7. The contribution is also expressed as a percentage interest
belonging to a member.
(e) Get a letter of consent from an accounting officer. You can only do this once you
have a reserved name (or if you are happy with the name of the accounting officer).
(f) File CC1 with the Registrar of Companies. Normally you take the original with two
copies, all on blue paper. All three are stamped and one is then returned to you.
(g) Wait. It takes about three to four weeks.
(h) When the CC1 is approved, the one approved copy is sent to you. The original stays
with the Registrar.
Companies and Patents Registration Office How to Register a Business in Namibia
7
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5.4. Amending the founding statement
When a change occurs in the constitution of the CC, for example change of members,
change of address, change of accounting officers etc, this should be reflected in the
Founding Statement. What you then do is to fill in a CC2, called an Amended Founding
Statement. It must be on yellow paper and the original with two copies are submitted to
the Registrar. One copy is stamped and returned to you. When it is approved, the
approved copy gets sent to the CC, and the original stays with the Registrar.
5.5. Pre-incorporation contracts
This is regulated in terms of section 53 of the Close Corporation Act. Section 53 reads as
follows:
53 Pre-incorporation contracts
(1) Any contract in writing entered into by a person professing to act as an agent or a trustee for a
corporation not yet formed, may after its incorporation be ratified or adopted by such corporation as if
the corporation had been duly incorporated at the time when the contract was entered into.
(2) The ratification or adoption by a corporation referred to in subsection (1) shall be in the form of a
consent in writing of all the members of the corporation, given within a time specified in the contract or,
if no time is specified, within a reasonable time after incorporation.
There are certain requirements when entering into a pre-incorporation contract:
(a) It must be entered into before incorporation.

(b) The persons entering into the contract must purport to enter into such on behalf of
the entity to be formed.
(c) It must be in writing. The section does not state when it must be in writing, so we
assume that it is sufficient if it is reduced to writing any time before incorporation.
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5.6. Capital Maintenance
A CC must maintain its capital in order to ensure that the creditors are protected. This is a
rule that stems from common law. Development in statutory law has, however, provided
for certain exceptions to this rule. The rule of capital maintenance is not applied as strictly
to CC’s as it is applied to companies.
In the Close Corporation Act, there are two statutory exceptions to the capital maintenance
rule: section 39 and section 40.
39 Payment by corporation for members' interests acquired
(1) Payment by a corporation in respect of its acquisition of a member's interest in the corporation shall be
made only-
(a) with the previously obtained written consent of every member of the corporation, other than
the member whose interest is acquired, for the specific payment;
(b) if, after such payment is made, the corporation's assets, fairly valued, exceed all its liabilities;
(c) if the corporation is able to pay its debts as they become due in the ordinary course of its
business; and
(d) if such payment will in the particular circumstances not in fact render the corporation unable to
pay its debts as they become due in the ordinary course of its business.
(2) For the purposes of subsection (1) "payment" shall include the delivery or transfer of any property.
40 Financial assistance by corporation in respect of acquisition of members' interests
A corporation may give financial assistance (whether directly or indirectly and whether by means of a loan,
guarantee, the provision of security or otherwise) for the purpose of, or in connection with, any acquisition of a
member's interest in that corporation by any person, only-
(a) with the previously obtained written consent of every member of the corporation for the specific
assistance;
(b) if, after such assistance is given, the corporation's assets, fairly valued, exceed all its liabilities;
(c) if the corporation is able to pay its debts as they become due in the ordinary course of its business; and
(d) if such assistance will in the particular circumstances not in fact render the corporation unable to pay
its debts as they become due in the ordinary course of its business.
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Section 39 lays down certain requirements needed when a CC buys back its own
membership interest:
(1) The prior written consent of all the members is needed. The consent cannot be
given retrospectively. All members must consent and the consent must be in
writing.
(2) The CC must be solvent after the purchase of the member’s interest.
(3) The CC must still be able to pay its debts when these debts become due and payable.
Section 40 is the CC-equivalent of section 38 of the Companies Act. In terms of section 38 of

the Companies Act, a company may not provide financial assistance to purchase its shares.
Section 40, on the other hand, allows such financial assistance, provided that requirements
(1) to (3) mentioned above (in terms of section 39) are met.
5.7. The Association Agreement and Constructive Notice
In terms of section 44 of the Close Corporation Act, the members of a close corporation may
enter into an association agreement. An association agreement may be concluded between
members, thus regulating any matter which may be set out in such an agreement in terms
of the Act, or any matter relating to the internal relationship between the members, or the
members and the corporation, in a manner not inconsistent with the Act. 8 An association
agreement can only be entered into if there are two or more members. Any member of the
corporation may inspect the association agreement, but no person who is not a member
shall be entitled to inspect it. Furthermore, no person dealing with the corporation shall be
deemed to have knowledge of the agreement. Therefore, a person acting on behalf of the
CC cannot use the principle of constructive knowledge against a third party.
8
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44 Association agreements
(1) The members of a corporation having two or more members may at any time enter into a written
association agreement signed by or on behalf of each member, which regulates-
(a) any matter which in terms of this Act may be set out or agreed upon in an association
agreement; and
(b) any other matter relating to the internal relationship between the members, or the members
and the corporation, in a manner not inconsistent with the provisions of this Act.
(2) A corporation shall keep any association agreement at the registered office of the corporation where
any member may inspect it and may make extracts therefrom or copies thereof.
(3) Whether or not an association agreement exists, any other agreement, express or implied, between all
the members of a corporation on any matter that may be regulated by an association agreement shall
be valid, provided that such express or implied agreement
(a) is not inconsistent with any provision of an association agreement;
(b) does not affect any person other than the corporation or a member who is a party to it; and
(c) ceases to have any effect when any party to it ceases to be a member of the corporation.
(4) Subject to the provisions of this Act, an association agreement or an agreement referred to in subsection
(3) shall bind the corporation to every member in his capacity as a member of that corporation and, in
such capacity, every member to the corporation and to every other member.
(5) A new member of a corporation shall be bound by an existing association agreement between the other
members as if he has signed it as a party thereto.
(6) Any amendment to, or the dissolution of, an association agreement shall be in writing and signed by or
on behalf of each member, including a new member referred to in subsection (5).
45 No access to or constructive notice of association agreement
No person who is not a member of a corporation shall, except by virtue of a provision of this Act, be entitled to
inspect any association agreement in respect of that corporation, and no person dealing with the corporation
shall be deemed to have knowledge of any particular thereof merely because it is stated or referred to therein,
whether or not the agreement is in accordance with section 44(2) kept at the registered office of the
corporation.
5.8. Representation of a close corporation
Subject to the Act, any member dealing with a third party on behalf of the close corporation
has the power to bind the corporation. An act of a member shall bind the corporation if
such act is expressly or impliedly authorised by the corporation or subsequently ratified by
the corporation, or if such act was performed for the carrying on, in the usual way, of
business either stated in the founding statement of the corporation or actually being carried
on by the business at the time of performance. If the person performing the act has no
power to act for the corporation and the person with whom he deals knows or reasonably
ought to know that the person has no such power, the act will be invalid. If the third party
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is, however, bona fide and could not reasonably have known, the act will be deemed to be
valid.
The association agreement of a corporation can restrict any member’s power to bind the
corporation. Any act performed for a purpose unconnected with the ordinary course of the
business shall be invalid, unless the corporation has ratified it.
54 Power of members to bind corporation
(1) Subject to the provisions of this section, any member of a corporation shall in relation to a person who is
not a member and is dealing with the corporation, be an agent of the corporation for the purposes of
the business of the corporation stated in its founding statement or actually being carried on by it.
(2) Any act of a member shall bind corporation, if-
(a) such act is expressly or impliedly authorized by the corporation, or is subsequently ratified by it; or
(b) such act is performed for the carrying on, in the usual way, of business of the kind stated in a
founding statement of the corporation or actually being carried on by the corporation at the
time of the performance of the act, unless the member so acting has in fact no power to act
for the corporation in the particular matter and the person with whom he deals has, or ought
reasonably to have, knowledge of the fact that the member has no such power.
(3) Where any act of a member of a corporation is performed for a purpose apparently not connected with
the ordinary course of the business of the corporation stated in its founding statement or actually being
carried on by it at the time of the performance of the act, the corporation shall not be bound by such
act, unless it has in fact been authorized or is ratified as contemplated in subsection (2) (a) by the
corporation.
(4) Where any association agreement restricts the power of any member to represent a corporation, or
where any member is disqualified under section 47 from participating in the management of the
business of a corporation, no act in contravention of the restriction or performed by such disqualified
person shall be binding on the corporation with respect to any person who has, or ought reasonably to
have, knowledge of such restriction or disqualification.
(5) Where the consent in writing of a member or members of a corporation is in any particular case
required in terms of the proviso to section 46 (b) , no act in contravention of such requirement shall be
binding on the corporation with respect to any person who has, or ought reasonably to have, knowledge
of the fact that the particular act is performed in contravention of such requirement.
5.9. Application of certain sections of the Companies Act
Section 55 of the Close Corporation Act applies certain sections of the Companies Act
mutatis mutandis to the Close Corporation Act. These sections relate to the prohibition of
financial assistance by a subsidiary to its holding company and the prohibition of loans to, or
security in connection with, directors and managers.
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55 Application of sections 37 and 226 of Companies Act 1973
(1) If the relationship between any company and any corporation is such that the corporation, if it were a
company, would be a holding company of such company, the provisions of section 37 of the Companies
Act regarding-
(a) the employment of funds of a company in a loan to; or
(b) the provision of any security by a company to another person in connection with an obligation
of,
its holding company, or a company which is a subsidiary of that holding company but is not a subsidiary
of itself, shall mutatis mutandis apply in relation to any such employment of funds or provision of
security by any such company in respect of any such corporation and in respect of any company which
would be a subsidiary of the corporation were it a company, but which is not a subsidiary of the first-
mentioned company.
(2) In the application in terms of subsection (1) of the provisions of subsection (3) (b) of the said section 37
of the Companies Act any reference therein to a director or officer, or a former director or officer, of a
holding company, shall be construed as a reference to any member or officer, or former member or
officer, of a corporation envisaged in subsection (1).
(3) If the relationship between any company and any corporation is as envisaged in subsection (1), the
provisions of section 226 of the Companies Act regarding the making by a company of any loan to, or
the provision of security by a company to another person in connection with any obligation of-
(a) any director or manager of the company's holding company or of another company which is a
subsidiary of its holding company; or
(b) another company or another juristic person controlled by one or more directors or managers
of the company's holding company or of a company which is a subsidiary of its holding
company, shall mutatis mutandis apply in relation to any such loan or provision of security by
any such company in respect of-
[Para (b) substituted by sec 22 (a) of Act 8 of 1994.]
(i) any member or officer of any such corporation, or any director or officer of
another company which would be a subsidiary of any such corporation were
the corporation a company; and
(ii) another company or another juristic person controlled by one or more
members of any such corporation, or by one or more directors or managers
of a company which would be a subsidiary of the corporation were it a
company.
[Subpara (ii) substituted by 22 (b) of Act 8 of 1994.]
(4) In the application in terms of subsection (3) of the provisions of subsection (5) of the said section 226 of
the Companies Act any reference therein to any director or officer of a holding company, shall be
construed as a reference to any member or officer of a corporation envisaged in subsection (1).
5.10. Piercing the veil of a corporation
The Close Corporation Act makes specific provision for a number of instances where a
member of a corporation would be personally liable, jointly and severally, for the debts of
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the Close Corporation, as an alternative to the ineffectual offence provisions of the
Companies Act. These instances are:9
 Where the name of the corporation is used without the abbreviation “CC”, with
the result that a third party dealing with the corporation is unaware of its juristic
personality;
 Where the member fails to pay or deliver its contribution to the Close
Corporation as stated in its founding statement;
 When the number of members exceed the limit of ten;
 Where a juristic person or trustee of a trust inter vivos purports to hold, whether
directly or indirectly, a member’s interest in the corporation;
 Where the corporation acquires a member’s interest, or gives financial
assistance for such acquisition in contravention with Section 39 and 40 of the
Close Corporation Act;
 Where a person takes part in the management of the business of a corporation
while being disqualified in terms of Section 47(1)(b) or (c); or
 Where the office of accounting officer is vacant for a period of six months.
A Court may also pierce the corporate veil, on application, where it appears that the business of a
corporation was carried on recklessly, with gross negligence or with intent to defraud any person or
for any fraudulent purpose.10 In addition thereto the Court may, whenever it finds that the
incorporation or use of a Close Corporation constitutes a gross abuse of the juristic personality of
the corporation as a separate entity, declare that the corporation is to be deemed not to be a juristic
person in respect of its rights, obligations and liabilities.11
9
10
11
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64 Liability for reckless or fraudulent carrying on of business of corporation
(1) If it at any time appears that any business of a corporation was or is being carried on recklessly, with
gross negligence or with intent to defraud any person or for any fraudulent purpose, a Court may on the
application of the Master, or any creditor, member or liquidator of the corporation, declare that any
person who was knowingly a party to the carrying on of the business in any such manner, shall be
personally liable for all or any of such debts or other liabilities of the corporation as the Court may
direct, and the Court may give such further orders as it considers proper for the purpose of giving effect
to the declaration and enforcing that liability.
(2) Without prejudice to any other criminal liability incurred where any business of a corporation is carried
on in any manner contemplated in subsection (1), every person who is knowingly a party to the carrying
on of the business in any such manner, shall be guilty of an offence.
65 Powers of Court in case of abuse of separate juristic personality of corporation
Whenever a Court on application by an interested person, or in any proceedings in which a corporation is

involved, finds that the incorporation of, or any use of, that corporation, constitutes a gross abuse of the juristic
personality of the corporation as a separate entity, the Court may declare that the corporation is to be deemed
not to be a juristic person in respect of such rights, obligations or liabilities of the corporation, or of such
member or members thereof, or of such other person or persons, as are specified in the declaration, and the
Court may give such further order or orders as it may deem fit in order to give effect to such declaration.
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6. Companies
6.1. Introduction
Companies are legal entities separate from its shareholders. Companies are regulated by
the Companies Act of 1973, although many vital rules relating to companies are not
contained in the Act, for example the doctrine of constructive notice, the rules relating to
the determination of divisible profits and the fiduciary duties and the duty of care and skill
owing by directors.12
The Act provides the framework for the incorporation, as Namibian entities, of public and
private companies, as well as associations not for gain or non-profit making companies.13
This latter category of company is treated as a public company in terms of the Act, except
for certain special requirements.14 A common feature in respect of all companies, except
for Section 53(b) companies,15 is that directors and members or shareholders have limited
liability for the debts and engagements of the company, which is a distinct legal entity.16
The liability is limited to the extent of share capital contributed, or in the case of an
association not for gain, to the guarantee provided by the member. Companies have
perpetual succession irrespective of changes in the members or shareholders.17
6.2. Different types of companies
The Companies Act provides for three main types of companies, namely:18
 Companies with share capital;

 Companies without share capital;
 External companies.
12
Blackman MS “Companies” in Joubert WA (ed) LAWSA Vol 4(1) First Reissue 1995 Durban Butterworths at par 2.
13
Sections 19, 32 and numerous other provisions of the Companies Act
14
Section 19(3) as read with Section 21 of the Companies Act
15
See the paragraph on the special form of private company used by professional persons.
16
Salomon v Salomon & Co Ltd [1897] AC 22
17
Section 65(1) of the Companies Act
18
Sections 19(1) and 322 of the Companies Act
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Companies with share capital are divided into public companies and private companies.19 A
private company [(Proprietary) Limited] is a company which restricts the transfer of its
shares, limits the number of its members to fifty and prohibits any offer to the public for the
subscription of any shares or debentures of the company.20 A private company may have a
single shareholder and need only have one director,21 and there are simpler provisions with
regard to quorums for general meetings.22 Voting rights of shares can also be regulated
more freely.23
A public company [Limited] does not operate under the same restrictions as a private
company, but, on the other hand, it is required to have at least seven members and two
directors at all times.24 Public companies are required to lodge a copy of their annual
financial statements with the Registrar of Companies,25 and are also obliged to furnish
reports to members.26 Public companies may be listed on the Namibian Stock Exchange
upon compliance with certain rules.
Companies without share capital are companies limited by guarantee, of which the
companies incorporated in terms of Section 21 of the Companies Act, called Incorporated
Associations not for Gain, are a special form. They are ordinarily used by non-profit
organisations who wish to have the benefit of limited liability and perpetual succession,
while promoting religion, art, science, education, charity, recreation or any other cultural or
social activity or communal or group interest. Section 21 Companies are deemed to be
public companies,27 and must comply with all formalities prescribed for public companies,
except those relating to the lodging of interim financial statements and payment of annual
duties.28
19
Sections 19(2) of the Companies Act
20
Section 20 of the Companies Act
21
Sections 32 and 208 of the Companies Act
22
23
24
Sections 32, 54(2) and 208 of the Companies Act
25
26
27
28
Page 20 of 59
In terms of Section 322 of the Companies Act a company or association incorporated under
the laws of any other country must lodge a certified copy of its memorandum and articles of
association, statute or charter, duly translated into English if necessary, as well as certain
other forms, with the Namibian Registrar of Companies within 21 days from establishing a
place of business in Namibia. Upon such registration the external company becomes a body
corporate in Namibia and subject to the provisions of the Companies Act.29
As is the case with all other companies, an external company must have an auditor 30 and a
registered postal and physical address in Namibia, file details of its directors,31 and provide
details of a person and his or her address who is authorised by the company to accept
service on its behalf of legal process and notices.32 It should be noted that annual company
duty calculated on the issued share capital plus any capital reserves is payable by all
companies in Namibia, including external companies.33 This may prove costly for an
enterprise with a substantial share capital or reserve fund.
6.3. Pros and cons
PROS CONS
1. Financial security 1. Expensive to establish
2. Separation between management and 2. Complex management and legislative
ownership measures.
3. More business clout
29
30
31
32
33
Section 173, 174 and 330 of the Companies Act
Page 21 of 59
6.4. Formation of a company
When registering a Company, the following steps need to be followed:
(a) Get a Power of Attorney from your client.

(b) Reserve a name on the CM5 form. You need to give three alternative names and
state the object of the Company. The CM5 must be stamped with a N$50.00
revenue stamp and submitted, on white paper with two copies, to the Registrar.
One copy is stamped and returned to you with a serial number. The name will
be rejected if it already exists, if it is misleading or if it is offensive. The
reservation is valid for two months.
(c) Get a letter of consent from an auditor. This can be done as soon as the name is
approved.
(d) Draft Articles and the Memorandum of Association. The form of the articles will
depend on the entity. There are examples of Articles in the Companies Act of
1973.
i. The Memorandum: this is the constitutive document of the Company.
It deals with all the external relations of the company and contains all
the detail of the company, including the objects of the company, the
shareholders, the auditors, pre-incorporation contracts if any, etc.
ii. The Articles: the articles contain the internal regulations of the
company, for example voting rights, meetings, proxy, powers of
directors, meeting of shareholders, etc.
(e) Fill out the CM22-form (physical and postal address of a company) and affix a
N$2,00 revenue stamp.
(f) The auditors must complete the CM31, which contains all their details. This
should also be stamped with a N$2,00 revenue stamp.
(g) Submit forms with Articles and Memorandum to the Registrar.
(h) Together with (d), you must apply for a certificate to commence business.
(i) Particulars of directors and officers of the company are completed on form
CM29 and are kept at the company’s registered office for inspection. Form
Page 22 of 59
CM29 must be completed and submitted within 14 days of any change of
appointment.
Companies and Patents Registration Office How to Register a Business in Namibia
6.5. Pre-incorporation contracts
This is regulated in terms of section 35 of the Companies Act. Section 35 reads as follows:
35 Power as to pre-incorporation contracts
Any contract made in writing by a person professing to act as agent or trustee for a company not yet
incorporated shall be capable of being ratified or adopted by or otherwise made binding upon and enforceable
by such company after it has been duly incorporated as if it had been duly incorporated at the time when the
contract was made and such contract had been made without its authority: Provided that the memorandum on
its registration contains as an object of such company the ratification or adoption of or the acquisition of rights
and obligations in respect of such contract, and that two copies of such contract, one of which shall be certified
by a notary public, have been lodged with the Registrar together with the lodgement for registration of the
memorandum and articles of the company.
Page 23 of 59
There are certain requirements when entering into a pre-incorporation contract:
(a) It must be entered into before incorporation.

(b) The persons entering into the contract must purport to enter into such on behalf of
the entity to be formed.
(c) It must be in writing. The section does not state when it must be in writing, so we
assume that it is sufficient if it is reduced to writing any time before incorporation.
(d) The company’s memorandum of association must give the company the power to
ratify pre-incorporation contracts.
(e) Two copies must be lodged when the company is registered. One copy must be
notarised.
(f) The company must receive its certificate to commence business.
At the first meeting of the shareholders, the shareholders must decide whether or not they
want to ratify the contract. If they do ratify it, it works retrospectively. If the contract is not
ratified, it is not valid, unless the contract itself deals with this eventuality.
6.6. Capital maintenance
A company must maintain its capital in order to ensure that the creditors are protected.
This is a rule that stems from common law. With regard to companies, there are basically
three rules pertaining to capital maintenance:
(1) A company cannot pay dividends out of its share capital. Dividends can only get paid
when the company makes a profit.
(2) A company is not allowed to buy its own shares.
(3) A company is not allowed to issue shares at a discount.
Development in statutory law has, however, provided for certain exceptions to this rule.
Section 75 of the Companies Act states that a company may alter its share capital and its
shares; sections 83 to 90 permits the company to reduce its share capital; section 226 states
that the members of a company may approve a loan to its directors and managers; section
Page 24 of 59
228 states that a general meeting may approve the disposal of the undertaking or greater
part of the assets of a company.
75 Company may alter share capital and shares
(1) Subject to the provisions of sections 56 and 102 a company having a share capital, if so authorized by its
articles, may by special resolution-
(a) increase its share capital by new shares of such amount, or increase the number of its shares
having no par value, as it thinks expedient;
(b) increase its share capital constituted by shares of no par value by transferring reserves or
profits to the stated capital, with or without a distribution of shares;
(c) consolidate and divide all or any part of its share capital into shares of larger amount than its
existing shares or consolidate and reduce the number of the issued no par value shares;
(d) increase the number of its issued no par value shares without an increase of its stated capital;
(e) subdivide its shares, or any of them, into shares of smaller amount than is fixed by the
memorandum;
(f) convert all of its ordinary or preference share capital consisting of shares having a par value
into stated capital constituted by shares of no par value, subject to the provisions of this Act:
Provided that an existing company may not so convert any share capital which is not fully
paid up;
(g) convert its stated capital constituted either by ordinary or preference shares of no par value
into share capital consisting of shares having a par value, subject to the provisions of this Act;
(h) cancel shares which at the time of the passing of the resolution in that behalf, have not been
taken or agreed to be taken by any person and diminish the amount of its authorized share
capital by the amount of the shares so cancelled or may cancel shares of no par value which
have not so been taken or agreed to be taken;
(i) convert any of its shares, whether issued or not, into shares of another class.
[Subsec (1) amended by sec 5(1) (a) of Act 111 of 1976.]
[Para (i) added by sec 5(1) (b) of Act 111 of 1976.]
(2) A cancellation of shares under subsection (1) (h) shall not be deemed to be a reduction of capital within
the meaning of this Act.
(3) Where under subsection (1) a company-
(a) increases its share capital by shares of a fixed amount, it shall pay to the Registrar an amount
of two rand and fifty cents for each one thousand rand, or part thereof, by which the share
capital is increased;
(b) increases the number of its shares of no par value, it shall-
(i) lodge with the Registrar, in the prescribed manner, a certificate given by the
auditor of the company showing the value of each issued share arrived at by
dividing the number of issued shares into the stated capital; and
(ii) pay to the Registrar an amount of two rand and fifty cents for each
thousand rand or part thereof calculated by multiplying the number by
which the number of the shares has been increased by the value of each
share as certified under subparagraph (i).
Page 25 of 59
83 Reduction of capital by special resolution
(1) A company having a share capital may, if-

(a) so authorized by its articles; and
(b) it has no creditors or all its creditors have consented to the reduction of capital; and
(c) the reduction of capital affects all its shares or any class of shares proportionally,
by special resolution reduce its share capital in any way other than by paying off capital instalments or in
future payments.
(2) An affidavit, in the form prescribed and accompanied by the prescribed fee, by a director or officer of the
company to the effect that the company as at the date of the special resolution has no creditors or that
all the creditors have consented to the proposed reduction of capital and that all its shares or all the
shares of the class concerned are affected proportionally by it, shall be annexed to the copy of the
special resolution lodged with the Registrar for registration together with the written consents of
creditors, if any.
(3) In this section "creditor", in relation to a company, means every creditor of the company who at the date
of the special resolution referred to in subsection (1) is entitled to any claim which, if that date were the
commencement of the winding-up of the company, would be admissible in proof against the company.
84 Reduction of capital confirmed by Court
(1) Where for any reason a reduction of share capital of a company having a share capital cannot be
effected under section 83, the company may, if so authorized by its articles, by special resolution and
subject to confirmation by the Court, reduce its share capital in any way, and in particular (without
prejudice to the generality of the power hereby conferred) may-
(a) cancel any paid-up share capital which is lost or not represented by available assets; or
(b) pay off any paid-up share capital which is in excess of the wants of the company.
(2) Where a company has passed a special resolution for reducing share capital, it shall within sixty days
apply to the Court for an order under this section confirming the reduction.
85 Creditors and objections to reduction of capital
(1) Where the proposed reduction of share capital under section 84 involves the payment to any
shareholder of any paid-up share capital, and in any other case if the Court so directs, every creditor of
the company who at the date fixed by the Court is entitled to any claim which, if that date were the
commencement of the winding-up of the company, would be admissible in proof against the company,
shall be entitled to object to the reduction.
(2) The Court shall settle a list of creditors so entitled to object and for that purpose shall ascertain as far as
possible, without requiring an application from any creditor, the names of those creditors and the
nature and amount of their claims and may order the publication of a notice fixing a period or periods
within which creditors not entered on the list are to claim to be so entered or are to be excluded from
the right of objecting to the reduction.
(3) Where a creditor entered on the list and whose claim is not discharged or determined, does not consent
to the reduction, the Court may, if it thinks fit, dispense with the consent of that creditor on the
company securing the payment of his claim by appropriating, as the Court may direct, an amount
therefor as follows-
(a) if the company admits the fuIl amount of his claim, or though not admitting it, is willing to
provide for it, then the full amount of the claim; or
Page 26 of 59
(b) if the company does not admit or is not willing to provide for the full amount of the claim, or if
the liability is contingent or the amount not ascertained, then an amount fixed by the Court
after a like enquiry and adjudication as if the company were being wound up by the Court.
86 Powers of Court as to order confirming reduction of capital
(1) On an application under section 84 the Court may make an order, on such terms and conditions as it
thinks fit, confirming the reduction or may grant a rule nisi calling on all persons concerned to show
cause why such an order shall not be granted, and where the proposed reduction of share capital
involves the payment to any shareholder of any paid-up share capital, the Court shall grant such a rule
nisi .
(2) The Court shall not make an order confirming the reduction or confirming a rule nisi referred to in
subsection (1) unless it is satisfied that every creditor of the company who under section 85 is entitled to
object to the reduction, has consented to the reduction or that his debt or claim has been discharged or
has determined or has been secured.
(3) The Court making any order confirming a reduction of capital by a company may make an order
requiring the company to publish as the Court directs the reasons for reduction or such other
information in regard thereto as the Court may think expedient with a view to giving proper information
to the public and, if the Court thinks fit, the causes which led to the reduction .
(4) The Court making an order confirming a reduction of capital by a company involving the payment to any
shareholder of any paid-up share capital in instalments or future payments may make an order to the
effect that-
(a) no proposed instalment or future payment shall be paid out unless it has been authorized by
the Registrar in writing;
(b) the Registrar shall issue such written authority only after the company has lodged with him all
affidavit in the form prescribed and accompanied by the prescribed fee by a director or officer
of the company to the effect that as at the date of the affidavit the company has no creditors
or that all the creditors have consented to the payment of the proposed instalment or future
payment, the written consents of creditors, if any, to be annexed to the said affidavit; and
(c) if the company is not able to furnish the said affidavit, it may apply to the Court for an order
sanctioning the payment of the proposed instalment or future payment.
(5) In an application for an order under subsection (4) (c) , the Court may grant an order on such terms and
conditions as it thinks fit and may exercise all the powers provided by this section as if it were an
application for confirmation of a reduction of capital.
87 Special provisions as to special resolutions for the reduction of capital
(1) Every special resolution for the reduction of the share capital of a company shall be in the prescribed
form and shall set out the then existing share capital, the particulars of the proposed reduction of
capital and the resultant state of the share capital of the company .
(2) Every such special resolution shall be taken to be a special resolution for the alteration of the
memorandum of a company .
(3) Notwithstanding the provisions of section 202, the Registrar shall register, on payment of the prescribed
fee, any special resolution for the reduction of the share capital of a company under section 84 upon the
lodging with him of the order of the Court confirming the reduction of capital or a certified copy of such
order.
Page 27 of 59
88 When reduction of capital effective
No company shall act upon any special resolution for the reduction of capital before the date on which it is
registered by the Registrar but such resolution may specify a date, not earlier than the date of its passing, as
from which the reduction of capital will have retrospective effect.
89 Publication of reduction of capital
The Registrar shall publish in the Gazette a notice of reduction of capital in respect of every special resolution
for the reduction of capital registered by him, within one month after the date of such registration.
90 Offences as to reduction of capital
If any director or officer of a company-

(a) wilfully conceals the name of any creditor entitled to object to a proposed reduction of
capital; or
(b) wilfully misrepresents the nature or amount of the debt or claim of any creditor; or
(c) aids, abets or is privy to any such concealment or misrepresentation as aforesaid,
he shall be guilty of an offence.
226 Prohibition of loans to or security in connection with transactions by directors and managers
(1) No company shall directly or indirectly make a loan to-

(a) any director or manager of-
(i) the company; or
(ii) its holding company; or
(iii) any other company which is a subsidiary of its holding company; or
(b) any other company or other body corporate controlled by one or more directors or managers
of the company or of its holding company or of any company which is a subsidiary of its
holding company;
or provide any security to any person in connection with an obligation of such director, manager,
company or other body corporate.
(1A) For the purpose of subsection (1)-
(a) "loan" includes-
(i) a loan of money, shares, debentures or any other property; and
(ii) any credit extended by a company, where the debt concerned is not payable
or being paid in accordance with normal business practice in respect of the
payment of debts of the same kind; and
(b) one or more directors or managers of a company contemplated in subsection (1) (b) shall be
deemed to control another company or body corporate only if-
(i) such director or manager or his nominee is a member or such directors or
managers or their nominess are members of such other company or body
corporate and the composition of its board of directors is controlled by such
director, manager or nominee or such directors, managers or nominees, and
such composition shall be deemed to be so controlled if such director or
manager or his nominee or such directors or managers or their nominees
may, by the exercise of some power and without the consent or concurrence
of any other person, appoint or remove the majority of the directors
concerned, and such director, manager or nominee or such directors,
Page 28 of 59
managers or nominees shall be deemed to have power to appoint a director
where a person cannot be appointed as a director without his or their
consent or concurrence; or
(ii) more than one-half of the equity share capital of that other company or
body corporate is held by such director, manager or nominee or such
directors, managers or nominees; and
[Para (b) amended by sec 21(1) (a) of Act 64 of 1977.]
(c) "security" includes a guarantee.
(1B) The provisions of subsection (1) and of paragraph (b) of subsection (1A) shall not be construed as
prohibiting a company from making a loan to, or providing security to any person in connection with an
obligation of, its holding company or subsidiary or a subsidiary of such holding company;
[Subsec (1B) inserted by sec 21(1) (b) of Act 64 of 1977.]
(2) The provisions of subsection (1) shall not apply-
(a) in respect of-
(i) the making of a loan by a company to its own director or manager;
(ii) the provision of security by a company in connection with an obligation of
its own director or manager;
(iii) the making of a loan by a company to any other company or other body
corporate controlled by one or more of the directors or managers of the
first-mentioned company; or
[Subpara (iii) inserted by sec 21(1) (c) of Act 64 of 1977.]
(iv) the provision of security by a company in connection with an obligation of
any other company or other body corporate controlled by one or more of
the directors or managers of the first-mentioned company,
[Subpara (iv) inserted by sec 21(1) (c) of Act 64 of 1977.]
with the consent of all the members of the company or in terms of a special resolution relating to a
specific transaction; or
(b) subject to the provisions of subsection (3), in respect of anything done to provide any director
or manager with funds to meet expenditure incurred or to be incurred by him for the purposes
of the company concerned or for the purpose of enabling him properly to perform his duties
as director or manager of that company; or
(c) in respect of anything done bona fide in the ordinary course of the business of a company
actually and regularly carrying on the business of the making of loans or the provision of
security; or
(d) to the provision of money or making of loans by a company for the purposes contemplated in
section 38(2) (b) and (c) ; or
(e) to the making of a loan or the provision of security with the approval of the company in
general meeting for housing for its director or manager; or
(f) in respect of-
(i) the making of a loan by a company to a director or manager of its
subsidiary; or
(ii) the provision of security by a company to another person in connection with
an obligation of a director or manager of its subsidiary:
Provided such director or manager is not also a director or manager of such company itself.
[Para (f) amended by sec 21(1) (d) of Act 64 of 1977.]
(3) No loan shall be made or security provided by virtue of the provisions of subsection (2) (b) , except-
(a) with the prior approval of the company given at a general meeting at which the amount of
the loan or the extent of the security and the purposes thereof are disclosed; or
Page 29 of 59
(b) on condition that, if the approval of the company is not given as aforesaid at or before the
next annual general meeting of the company, the loan shall be repaid or the liability under
the security shall be discharged, within six months from the conclusion of that annual general
meeting.
(4) Any director or officer of a company who authorizes, permits or is a party to the making of any loan or
the provision of any security contrary to the provisions of this section, shall-
(a) be liable to indemnify the company and any other person who had no actual knowledge of
the contravention, against any loss directly resulting from the invalidity of such loan or
security; and
(b) be guilty of an offence.
(5) For the purposes of subsection (4) "director or officer of a company" includes, where the company is a
subsidiary, any director or officer of its holding company.
[Sec 226 substituted by sec 19 of Act 111 of 1976.]
228 Disposal of undertaking or greater part of assets of company
(1) Notwithstanding anything contained in its memorandum or articles, the directors of a company shall not
have the power, save with the approval of a general meeting of the company, to dispose of-
(a) the whole or substantially the whole of the undertaking of the company; or
(b) the whole or the greater part of the assets of the company.
(2) No resolution of the company approving any such disposal shall have effect unless it authorizes or
ratifies in terms the specific transaction.
6.7. Constructive notice and ultra vires acts
Company documents are available to the public. Any person can request copies of certain
documents from the Registrar of Companies, upon the payment of the prescribed fee.34 The
doctrine of constructive notice flows from this.35 When dealing with a company, one can
assume that you will enquire about the objects and the functions of the company before
entering into a contract.
The Common Law requirements for the contractual liability of a juristic person are that:-
 The juristic person should have the necessary capacity and powers to perform a
particular juristic act; and
 The representative of the juristic person should have the necessary authorisation to
bind the juristic person in respect of that particular juristic act.
34
For companies, N$0.50 to draw the file and N$0.10 per page to copy the file. It is paid by affixing the necesssary
amount of revenue stamps to the request form.
35
Page 30 of 59
This led to further Common Law rules, collectively known as the ultra vires doctrine. In
terms thereof a company can only act within the parameters of its main object clause
contained in its memorandum. The ultra vires doctrine was complemented by the doctrine
of constructive notice, in terms whereof a person dealing with a company is deemed to
have knowledge of the statutes of the company. A company would therefore not be bound
if it contracted outside the scope of its main object, and the third party dealing with the
company could not complain as he was deemed to have known about the company’s
incapacity. The result was severely prejudicial to third parties contracting in good faith with
a company, and the legislator intervened by means of Section 36 of the Companies Act.
Section 36 addressed the situation where the company did not have the necessary power to
perform a particular juristic act, but did nothing to alleviate the position of the third party
where the person purporting to act on behalf of the company in a transaction had not been
duly authorised by the company to do so. In this regard, Namibian Company Law follows
the Turquand-rule36, which states that a third party contracting in good faith with the
company could assume that the internal prerequisites and procedures of a company,
authorising its representative, were duly fulfilled. “Good faith’ implies that the company
would not be bound if the third party knew, or ought reasonably to have known, that the
internal conditions were not in fact fulfilled, or if circumstances were so suspicious as to
have reasonably alerted the third party.
36 Acts ultra vires the company not void
No act of a company shall be void by reason only of the fact that the company was without capacity or power
so to act or because the directors had no authority to perform that act on behalf of the company by reason only
of the said fact and, except as between the company and its members or directors, or as between its members
and its directors, neither the company nor any other person may in any legal proceedings assert or rely upon
any such lack of capacity or power or authority.
36
Formulated in the case of Royal British Bank v Turquand 1856 6E & B 327
Page 31 of 59
6.8. Piercing the corporate veil
When it appears, whether in winding-up, judicial management or otherwise, that any

business of the company was or is being carried on recklessly or with the intent to defraud
creditors of the company or creditors of any other person or for any fraudulent purpose, the
court may, on the application of the master, the liquidator, the judicial manager, any
creditor or member or contributory of the company, declare that any person who was
knowingly a party to the carrying on of the business in that manner will be personally
responsible, without limitation of liability, for all or any of the debts or other liabilities of the
company as the court may direct. This provision, as do all the provisions of the section, has
effect notwithstanding that the person may be criminally liable in respect of the matters on
the ground of which the declaration is made.
This remedy does not exclude any common law remedy that anyone may have where injury
was caused by dolus or culpa. The common law remedies, however, require a causal
connection that section 424 does not require. However, the statutory remedy presupposes
the existence of debts or other liabilities on the part of the company; and therefore the
provisions of the section cannot be brought into operation unless there is already some
such independent cause of action against the company.37
424 Liability of directors and others for fraudulent conduct of business
(1) When it appears, whether it be in a winding-up, judicial management or otherwise, that any business of
the company was or is being carried on recklessly or with intent to defraud creditors of the company or
creditors of any other person or for any fraudulent purpose, the Court may, on the application of the
Master, the liquidator, the judicial manager, any creditor or members or contributory of the company,
declare that any person who was knowingly a party to the carrying on of the business in the manner
aforesaid, shall be personally responsible, without any limitation of liability, for all or any of the debts or
other liabilities of the company as the Court may direct.
(2) (a) Where the Court makes any such declaration, it may give such further directions as it thinks proper
for the purpose of giving effect to the declaration, and in particular may make provision for making the
liability of any such person under the declaration a charge on any debt or obligation due from the
company to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets
of the company held by or vested in him or any company or person on his behalf or any person claiming
as assignee from or through the person liable or any company or person acting on his behalf, and may
37
XXX
Page 32 of 59
from time to time make such further orders as may be necessary for the purpose of enforcing any charge
imposed under this subsection.
(b) For the purposes of this subsection, the expression "assignee" includes any person to whom or in
whose favour, by the directions of the person liable, the debt, obligation, mortgage or charge was
created, issued or transferred or the interest was created, but does not include an assignee for valuable
consideration given in good faith and without notice of any of the matters on the ground of which the
declaration is made.
(3) Without prejudice to any other criminal liability incurred, where any business of a company is carried on
recklessly or with such intent or for such purpose as is mentioned in subsection (1), every person who
was knowingly a party to the carrying on of the business in the manner aforesaid, shall be guilty of an
offence.
(4) The provisions of this section shall have effect notwithstanding that the person concerned may be
criminally liable in respect of the matters on the ground of which the declaration is made.
6.9. The protection of minority shareholders
Because the management of a company is assumed by the directors, there is always the
possibility that the directors can manage the company to the detriment of the shareholders.
Section 252 of the Companies Act states that any member of a company who complains that
any particular act or omission of a company is unfairly prejudicial, unjust or inequitable, or
that the affairs of the company are being conducted in a manner unfairly prejudicial, unjust
or inequitable to him or to some part of the members of the company, may make an
application to the Court for an order under this section.
252 Member's remedy in case of oppressive or unfairly prejudicial conduct
(1) Any member of a company who complains that any particular act or omission of a company is unfairly
prejudicial, unjust or inequitable, or that the affairs of the company are being conducted in a manner
unfairly prejudicial, unjust or inequitable to him or to some part of the members of the company, may,
subject to the provisions of subsection (2), make an application to the Court for an order under this
section.
(2) Where the act complained of relates to-
(a) any alteration of the memorandum of the company under section 55 or 56;
(b) any reduction of the capital of the company under section 83;
(c) any variation of rights in respect of shares of a company under section 102; or
(d) conversion of a private company into a public company or of a public company into a private
company under section 22,
an application to the Court under subsection (1) shall be made within six weeks after the date of the
passing of the relevant special resolution required in connection with the particular act concerned.
(3) If on any such application it appears to the Court that the particular act or omission is unfairly
prejudicial, unjust or inequitable, or that the company's affairs are being conducted as aforesaid and if
the Court considers it just and equitable, the Court may, with a view to bringing to an end the matters
complained of, make such order as it thinks fit, whether for regulating the future conduct of the
Page 33 of 59
company's affairs or for the purchase of the shares of any members of the company by other members
thereof or by the company and, in the case of a purchase by the company, for the reduction accordingly
of the company's capital, or otherwise.
(4) Where an order under this section makes any alteration or addition to the memorandum or articles of a
company-
(a) the alteration or addition shall, subject to the provisions of paragraph (b) , have effect as if it
had been duly made by special resolution of the company; and
(b) the company shall, notwithstanding anything contained in this Act, have no power, save as
otherwise provided in the order, to make any alteration in or addition to its memorandum or
articles which is inconsistent with the order, except with the leave of the Court.
(5) (a) A copy of any order made under this section which alters or adds to or grants leave to alter or add to
the memorandum or articles of a company shall, within one month after the making thereof, be lodged
by the company in the form prescribed with the Registrar for registration.
(b) Any company which fails to comply with the provisions of paragraph (a) , shall be guilty of an
offence.
Page 34 of 59
7. The Business Trust
7.1. Introduction
The common law in Namibia has adopted from the common law of South Africa the concept
of a trust. This concept initially derived in South Africa from English law, but developed
separately from English law and has become unique in its own right.
A trust comes into existence when the settler or founder divests him- or herself of assets in
favour of the trust to be administered by trustees for the benefit of beneficiaries or some
impersonal object. A trust need not be constituted by written deed, although this is usually
done. A testamentary trust can be executed to come into effect on the death of the
founder, or alternatively a trust can be constituted during his or her lifetime. It is optional
to have the deed executed before a notary public.
The trust deed is a contractual document which is strictly interpreted and determines the
object of the trust, identifies the trust property, delineates the powers and duties of
trustees, nominates the beneficiaries, if any, and determines the duration of the trust. If
the trustees are appointed by written deed a copy of the deed must be lodged with the
Master of the High Court of Namibia in terms of the Trust Monies Protection Act.38 This is
an Act passed by the South African legislature, which remains applicable in Namibia. The
Master of the High Court may require trustees so appointed to file security for the due
administration of the trust.
The trust may be of interest to an entrepreneur as its deed can be structured so as to cater
for any number of lawful objects, including the conduct of business for gain. In recent times
such trusts, commonly referred to as business trusts, have become more popular largely
due to tax advantages, greater flexibility, less accountability to the public and possible
limited liability.
38
Act 34 of 1934
Page 35 of 59
A trust does not create separate legal identity. The trustees become owners of the trust
property and also assume responsibility for the trust liabilities. When a trust is sued, each
trustee must be sued in his or her capacity as such.
7.2. The purpose of a business trust
A business trust is defined as a trust where the trustees do not simply protect and manage
the trust assets, but primarily uses these for carrying on business for profit in order to
benefit the trust beneficiary or to further the aims of the trust.
7.3. Formation of a business trust
When forming a business trust, the following steps need to be followed:
(a) Draft a Deed of Trust. A trust is created by means of a document (the Trust Deed).
The deed must contain the names of the trustees and must indicate the
beneficiaries. It is possible for the trustees to be beneficiaries as well.
(b) Submit the Trust Deed to the Master of the High Court.
7.3. Types of trusts
There are two types of trusts: a trust inter vivos and a trust mortis causa (testamentary
trust). An inter vivos trust is created by a person during his lifetime, while a trust mortis
causa is created by a person upon his death by means of his will.
7.4. The taxation of trusts
Trusts are taxed at a flat rate of 40% in South Africa, while they are not taxed in Namibia. In
his budget speech, the Minister of Finance suggested that trusts be taxed at the same rate
as companies, but at present they are not taxed.
Page 36 of 59
In Meyerowitz v Commissioner of Inland Revenue, Meyerowitz was an attorney who
received income from journal articles and publishing law text books. He formed Vco and
organised that all royalties be channelled into Vco, of which he was the shareholder. He
also formed a trust, of which trust his children were the beneficiaries, and ceded all his
rights in respect of royalties to the trust. At that stage trusts were not taxed in South Africa.
The court found that this scheme was an attempt to avoid tax, and Meyerowitz was found
guilty.
Page 37 of 59
8. The section 53(b)-company
When a group of professionals, like engineers, accountants or lawyers, approach you to

form a business, one option is the section 53(b)-company. The name of this type of
company is usually followed by “Inc.” for incorporated (in Afrikaans, “Ing.” for ingelyf). It is
a company with separate legal identity and limited liability, but its liability is not as limited
as ordinary companies. Section 53(b) imposes liability on the directors of the company. The
Company is a private company, but it is expected that because of its professional standing,
the directors must somehow be liable. A provision stating that all directors and past directors
bear concurrent liability with the company in respect of debts contracted during their periods of
office is included in the memorandum.
53 Memorandum may contain special conditions and may provide

for unlimited liability of directors
(b) in the case of a private company, provide that the directors and past directors shall be liable jointly and
severally, together with the company, for such debts and liabilities of the company as are or were
contracted during their periods of office, in which case the said directors and past directors shall be so
liable.
Page 38 of 59
9. Judicial Management
9.1. Introduction
If a company finds itself in financial difficulties, either by reason of mismanagement or is for

any other cause unable to pay its debts or probably unable to meet its obligations and is
prevented from becoming a successful concern and there is a reasonable possibility that,
under the right management, it can be successful again, the Court can place that company
under judicial management.39 Judicial management is an extraordinary procedure and a
special privilege given to a company.40
The purpose of judicial management is exactly the opposite of liquidation: whereas

liquidation aims at winding-up the company and bringing about its dissolution, judicial
management aims at avoiding liquidation where there is a possibility that the company
might overcome its difficulties by proper management. 41 It is not intended to be a
substitute for liquidation. 42 The granting of a judicial management order, whether
provisional or final, does not have the effect of a winding-up order and does not institute a
concursus creditorum.43 The judicial manager is also not expected to tender security as in
the case of winding-up.44
Where a company is placed under judicial management, the name of the company must be
followed by the statement “Under Judicial Management”,45 for example ABC (Pty) Ltd
(Under Judicial Management).
39
Section 427(1) of the Companies Act 61 of 1973 (“the Act”); De Wet JC and Van Wyk AH De Wet en Yeats Die Suid-
Afrikaanse Kontraktereg en Handelsreg 4ed (1978) Durban Butterworths at 720 – 721.
40
Ben-Tovim v Ben-Tovim and Others 2000 (3) SA 325 at 331.
41
S. Cohen Ltd v Johnston & Johnston 1970 (4) SA 332 (SWA) at 336.
42
Meskin PM et al “Henochsberg on the Companies Act” 2006 Service Issue 23 Durban LexisNexis Butterworths at
923.
43
925.
44
946.
45
Section 49(5) of the Companies Act.
Page 39 of 59
When the company is placed under judicial management, the directors are divested of their
powers and a judicial manager is appointed.46 The judicial manager is not an officer of the
company, but an officer of the court and stands in a fiduciary relationship to the company,
its members and its creditors.47 He or she is remunerated at such a rate as may be fixed by
the Master from time to time.48
9.2. Application for Judicial Management
9.2.1. Who may bring the application?
An application for judicial management can be brought by the company, one of its creditors
(including contingent or prospective creditor), by one of its members or by all three parties
jointly.49 It should be noted, however, that a court will not readily grant an application
brought by members of a company. The reason for this is that judicial management is an
invasive order and that members have the power to bring about changes that will be less
invasive than a judicial management order, for example choosing new directors.50
9. 2.2. Conditions that need to be met
The conditions that must be satisfied can be broken up as follows:51
(1) The company in question must either:

(a) Be unable to pay its debts; or
(b) Probably be unable to meet its obligations.
(2) The company must either:
(a) Not have become a successful concern; or
46
47
944.
48
951.
49
Section 427(2) read with section 346(1)(a) – (c) of the Act.
50
De Wet JC and Van Wyk AH De Wet en Yeats Die Suid-Afrikaanse Kontraktereg en Handelsreg 4ed (1978) Durban
Butterworths at 722 and the authorities cited there.
51
See Ben-Tovim v Ben-Tovim and Others 2000 (3) SA 325 at 330 – 331.
Page 40 of 59
(b) Be prevented from becoming a successful concern.
(3) There must be a reasonable probability that, if the company is placed under judicial
management, the company will be enabled to pay its debt or to meet its obligations
and will become a successful concern again.
(4) It must appear to the court that it would be just and equitable to grant the order.
9.2.3. Granting the application
If it appears to the court that there is a reasonable possibility that the company might
become a successful concern if placed under judicial management and that such an order
would be just and equitable, the court may grant an order to place the company under
judicial management.52 All four conditions must be present before the court grants the
order. The court has discretion whether it will grant the order or not.53
The onus is on the applicant to prove the conditions stated in section 427(1). A mere hope
expressed that it will become a successful concern again is not enough, 54 but an ultimate
discharge of liabilities is required.55 It has to be a probability, not only a possibility.56 It has
been argued that the onus of the applicant in an application for a final judicial management
order is heavier than the onus on the applicant for a provisional judicial management
order.57 In coming to this conclusion, the court looked at the wording of section 432(2),
dealing with the granting of a final judicial management order on the return date of a
provisional order. The wording is somewhat different than in section 427(1). It states that
the court will grant the final judicial management order “...if it appears to the Court that the
company will, if placed under judicial management, be enabled to become a successful
concern...” as opposed to section 427(1) where it is stated that the court will grant a judicial
management order if “...there is a reasonable probability that, if it is placed under judicial
management, it will be enabled to pay its debts or to meet its obligations and become a
52
Section 427(3) of the Act.
53
54
55
56
926.
57
Tenowitz v Tenny Investments (Pty) Ltd 1979 (2) SA 680 (E) at 683.
Page 41 of 59
successful concern...” 58 This view is supported by other authorities as well. 59 Other
authorities maintain, however, that the requirements for a judicial management order,
whether provisional or final, is contained in section 427(1) and that it could not have been
the intention of the legislature to introduce a different standard with section 432(2).60
In order to clarify the conflicting views stated above, it might be useful to turn to accepted
principles of statutory interpretation. The first useful rule is that one must accept that the
legislature did not intend any superfluity of words.61 Another rule states that, where there
are two conflicting provisions in one Act and both are clear in themselves, the one more in
harmony with the intention of the Act should be followed.62 In our situation, however, the
two sections are not necessarily mutually destructive. It is quite possible that both apply. It
is my submission that there is indeed a heavier burden on the applicant for a final judicial
management order, but only in instances where a provisional judicial management order
has already been granted. This also accords with the intention of the Act. We have already
stated that judicial management is an invasive procedure that will only be granted in
exceptional circumstances. This should be even more so in instances where the company an
opportunity has already been granted to “test” judicial management, ie placing the
company under provisional judicial management. It therefore makes sense to place a
heavier onus on an applicant where provisional judicial management has already been
granted. If a final judicial management order is applied for ab initio, the onus would be the
same as for a provisional judicial management order, ie the onus intended in section 427(1).
It is vital to ascertain the reasons for the company’s incapacity to pay its debt and failure.63
The purpose of judicial management is not to interfere in the company’s internal affairs in
cases where there is an internal dispute or deadlock amongst the people in control of the
58
Own emphasis.
59
Cilliers HS et al Cilliers and Benade Corporate Law 3ed (2000) Durban LexisNexis at 481.
60
Meskin PM et al “Henochsberg on the Companies Act” 2006 Service Issue 23 Durban LexisNexis Butterworths at 926
and 940.
61
Kellaway EA Principles of Legal Interpretation of Statutes, Contracts and Wills (1995) Durban Butterworths at 164.
62
Kellaway EA Principles of Legal Interpretation of Statutes, Contracts and Wills (1995) Durban Butterworths at 164.
63
Page 42 of 59
company and will therefore not be granted in such circumstances.64 It should also not be
granted where the company has suffered a temporary financial setback.65
In considering the order, the court must take into account the rights of the member and
creditors. The court must look specifically at the fact that an unpaid creditor is entitled to a
winding-up order.66
9.3. Provisional Judicial Management Orders
A court has the discretion to grant a provisional judicial management order. In such an
order, the court may state the return day, or dismiss the application or make any other
order that it deems just.67 The return day may not be later than sixty days after the date the
order is given, but the court may extend this period on good cause shown. 68 The Companies
Act prescribes the content of the provisional judicial management order.69 The applicant, a
creditor, a member, the provisional judicial manager or the Master may apply to the court
that granted the order to vary the terms of the order or to discharge it.70
When a provisional judicial management order is granted, the property of the company is
deemed to be vested in the Master of the High Court until a provisional judicial manager has
been appointed.71 The Master must appoint a provisional judicial manager as soon as
possible. Neither the auditor of the company nor any person disqualified under the
Companies Act from being appointed a liquidator in the winding-up of a company may be
appointed as the provisional judicial manager. The provisional judicial manager must give
64
65
923.
66
927.
67
68
69
70
71
Section 429(a) of the Act.
Page 43 of 59
such security as determined by the Master. The provisional judicial manager shall hold
office as such until a final order has been made.72
The provisional judicial manager must assume the management of the company and
recover and reduce into possession all the assets of the company.73 He or she must, within
seven days after appointment, lodge with the Registrar, under cover of the prescribed form,
a copy of his letter of appointment.74 He or she must also prepare a report that contains an
account of the general affairs of the company, the reason why the company is in such a
state, a statement of the assets and liabilities, a complete list of creditors and the amount of
each creditor’s claim, particulars as to the source or sources from which money has been or
is to be raised for purposes of carrying on the business of the company and the considered
opinion of the provisional judicial manager as to the prospects of the company becoming a
successful concern and of the removal of the facts or circumstances which prevent the
company from becoming a successful concern.75
The Master must, as soon as possible after a provision order is granted, convene separate
meetings of the creditors, the members and debenture-holders (if any) of the company.76
During this meeting they must consider the report of the provisional judicial manager and
the desirability or otherwise of placing the company under final judicial management.77
They must also nominate persons to be considered for appointment as final liquidator. 78 At
the meeting held with the creditors, each creditor must also prove his or her claim against
the company.79 The chairman of the meeting must prepare and lay before the Court a
report of the proceedings of such meeting, including a summary of the reasons for any
conclusion regarding the final order for judicial management.80
72
Section 429(b)(i) of the Act.
73
74
Section 430(b) of the Act.
75
Section 430(c) of the Act.
76
Section 429(b)(ii) of the Act.
77
Section 431(2)(a) of the Act.
78
Section 431(2)(b) of the Act.
79
Section 431(2)(c) of the Act.
80
Page 44 of 59
On the return day, the court may grant a final management order if the court is satisfied
that, if placed under judicial management, the company will become a successful concern
again.81 The court may also discharge the provisional order or make any other order it
deems just.82 The court has to take the following into consideration before granting a final
judicial management order, discharging the provisional order or making any other order:83
(a) the opinion and wishes of creditors and members of the company;
(b) the report of the provisional judicial manager;
(c) the number of creditors who did not prove claims at the first meeting of
creditors and the amounts and nature of their claims;
(d) the report of the Master; and
(e) the report of the Registrar,
9.4. The Final Judicial Management Order
9.4.1. Content and Amendment of the Final Judicial Management Order
The final judicial management order must contain directions for the vesting of the
management of the company, subject to the supervision of the Court, in the final judicial
manager, the handing over of all matters and the accounting by the provisional judicial
manager to the final judicial manager and the discharge of the provisional judicial manager,
if applicable.84 It must also contain directions regarding the remuneration of the final
judicial manager.85 It can contain any such other directions as to the management of the
company, or any matter incidental thereto, including directions conferring upon the final
judicial manager the power, subject to the rights of the creditors of the company, to raise
money in any way without the authority of shareholders, as the Court may consider
necessary.86
81
See 2.3. above.
82
83
84
85
Section 432(3)(b) of the Act.
86
Section 432(3)(c) of the Act.
Page 45 of 59
The Master, final judicial manager or representative of the creditors of the company, chosen
by virtue of a resolution passed by a majority in value and number of such creditors at a
meeting of those creditors, can apply to the court which has granted the final order to vary
the terms of the order.87
9.4.2. Duties of the Final Judicial Manager
The duties of the final judicial manager is subject to the provisions of the memorandum and
articles of the company concerned in so far as they are not inconsistent with any direction
contained in the relevant judicial management order.88 The judicial manager must at all
times keep the purpose of the judicial management order in mind.89
The final judicial manager must, before the commencement of the final order, ascertain
whether any past or present director or officer of the company has contravened or appears
to have contravened any provision of the Companies Act or has committed any other
offence.90 If any offence has been committed by a past or present director or officer, the
final judicial manager must, within six months after appointment, submit a report to the
Master regarding such offence or offences.91 Before the commencement of the final order
the final judicial manager must also ascertain whether any past or present director or officer
is or appears to be personally liable for damages or compensation to the company or for any
debts or liabilities of the company.92 If so, a report to this extent must also be lodged with
the Master within six months after appointment.93
Once a final judicial management order has been made, the final judicial manager takes
over and assumes the management of the company from the provisional judicial manager, if
one was appointed.94 The final judicial manager must conduct the management of the
87
88
Section 433 of the Act.
89
Butterworths at 724.
90
Section 433(j) of the Act.
91
Section 433(j) read with section 400 of the Act.
92
Section 433(k) of the Act.
93
Section 433(k) of the Act.
94
Page 46 of 59
company in such manner as he may deem most economic and most promotive of the
interests of the members and creditors of the company. The final judicial manager must,
however, comply with any direction made by the court in the final judicial management
order.95
The final judicial manager must lodge with the Registrar a copy of the judicial management
order and of the Master's letter of appointment under cover of the prescribed form. This
must be done within seven days after his or her appointment.96 The final judicial manager
must also comply with the provisions relating to annual returns 97 and must keep such
accounting records and prepare such annual financial statements, interim reports and
provisional annual financial statements as the company or its directors would have been
obliged to keep or prepare if it had not been placed under judicial management. 98 He or she
must also convene all necessary meetings, including the annual general meeting, other
meetings of the members and meeting of the creditors. 99 Copies of all documents
submitted to these meetings must be lodged with the Master.100
If at any time the final judicial manager is of opinion that the continuation of the judicial
management will not enable the company to become a successful concern, he or she may
apply to the court, after not less than fourteen days' notice by registered post to all
members and creditors of the company, for the cancellation of the relevant judicial
management order and the issue of an order for the winding-up of the company.101
9.5. Application of Assets during Judicial Management
A judicial manager may only sell or otherwise dispose of company assets with the leave of
the court, unless such sale or disposal is necessary in the ordinary course of the company’s
95
Section 433(b) and section 433(c) of the Act.
96
Section 433(d)(i) of the Act.
97
Section 433(e) read with section 173 of the Act.
98
Section 433(f) of the Act.
99
Section 433(g) and (h) of the Act.
100
Section 433(i) of the Act.
101
Section 433(l) of the Act.
Page 47 of 59
business.102 All moneys of the company becoming available to the judicial manager may
only be used by him in paying the costs of the judicial management and in the conduct of
the company's business in accordance with the judicial management order and so far as the
circumstances permit in the payment of the claims of creditors which arose before the date
of the order.103 The costs of the judicial management and the claims of creditors must be
paid mutatis mutandis in accordance with the law relating to insolvency as if those costs
were costs of the sequestration of an estate and those claims were claims against an
insolvent estate.104 This section is only applicable during the subsistence of the judicial
management and has therefore no application in a winding-up.105
9.6. Preferential Claims, Voidable and Undue Preferences and the Application of Certain
Provision Relating to Winding-Up
At a meeting convened by a final or provisional judicial manager, the pre-judicial creditors

may resolve that all liabilities incurred or to be incurred by the final or provision judicial
manager in the conduct of the company's business shall be paid in preference to all other
liabilities not already discharged exclusive of the costs of the judicial management. The
liabilities incurred after the order has been granted have preference in the order in which
they were incurred over all unsecured claims against the company except claims arising out
of the costs of the judicial management.106 If a judicial management order is superseded by
a winding-up order, this preference remains in force except in so far as claims arising out of
the costs of the winding-up are concerned.107 All claims based on such liabilities incurred by
the judicial manager shall be taken to have been proved.108 The provisions regulation the
meeting of creditors in the law of insolvency applies mutatis mutandis.109
102
103
104
105
949.
106
107
Section 435(1)(b)(i) of the Act.
108
Section 435(1)(b)(ii) of the Act.
109
Page 48 of 59
The period of judicial management is excluded in the calculation of any period of time for
the purpose of determining whether a bond creditor has a preferential claim. 110 This
applies, however, only where judicial management is superseded by windging-up.111
For purposes of judicial management, certain provision of the Companies Act relating to the
winding-up of a company shall apply as if the company under judicial management were a
company being wound up and the judicial manager were the liquidator. These provisions
are the provisions relating to the inspection of records, meetings of creditors and members
and voting at such meetings, summoning and examination of persons as to affairs of
company and the provisions relating to personal liability of delinquent directors and others
and offences, save the section dealing with private prosecution.112 The court may also order
that certain other provisions of the Companies Act shall apply to judicial management.113
The provisions of the law of insolvency relating to voidable and undue preferences applies
mutatis mutandis where a disposition of property, if made by a company unable to pay its
debts, is set aside by the Court at the suit of the judicial manager.114
9.7. Position of the Auditor during Judicial Management
The provisions of the Companies Act relating to the appointment and reappointment of an
auditor and the rights and duties of all auditors shall continue to apply as if any reference in
the said provisions to the directors of the company were a reference to the judicial
manager.115 The purpose of this section is to ensure that a company is still in a position to
account to its members and that the members still have the benefit of an auditor.116
110
Section 437 of the Act read with section 88 of the Insolvency Act 24 of 1936.
111
955.
112
Section 439(1) and (2) of the Act.
113
114
Section 436(1) and (2) of the Act.
115
116
956.
Page 49 of 59
9.7. Cancellation of a Judicial Management Order
A judicial manager117 or any person having an interest in the company may apply to the
court that granted the judicial management order that it be cancelled. “Any other person”
refers to any person with sufficient pecuniary and proprietary interest in the company.118
My submission is that directors cannot apply for cancellation of a judicial management
order. The obvious reason is that, during the period of judicial management, the directors
have no interest in the company as their duties have been suspended.
The court will only cancel the order if it appears to the court that the purpose of the order
has been fulfilled or that for any reason it is undesirable that such order should remain in
force.119 When a judicial management order has been cancelled, the judicial manager must
submit a copy of the cancellation order to the Registrar within seven days of the
cancellation of such judicial management order.120 When the order is cancelled, the judicial
manager is divested of his or her functions and the court shall give such directions as may be
necessary for the recommencement of the management and control of the company by the
officers thereof, including directions for the convening of a general meeting of members for
the purpose of electing directors of the company.121
If the purpose of the judicial management order fails, the next step is likely to be liquidation.
The judicial manager then has an obligation to apply for the cancellation of the judicial
management order and to then apply for a liquidation order.122
117
According to Meskin PM et al “Henochsberg on the Companies Act” 2006 Service Issue 23 Durban LexisNexis
Butterworths at 957 is of the opinion that this section only applies to final judicial managers, while De Wet JC and
Van Wyk AH De Wet en Yeats Die Suid-Afrikaanse Kontraktereg en Handelsreg 4ed (1978) Durban Butterworths at
727 argue that it is applicable to provisional and final judicial managers.
118
959.
119
120
Section 433(d)(ii) of the Act.
121
122
Butterworths at 728.
Page 50 of 59
10. Administration Orders
Section 74 of the Magistrates Court Act 32 of 1944 provides for a Magistrates Court
procedure for small businesses in financial difficulty. The affidavit sets out the liabilities,
debts etc and then states that you want somebody to be appointed as administrator to take
custody of your estate and to manage it. The person then takes all your income and debts
and manages it for you.
Administration orders are popular is practice because they stay the execution of the debt
against you. As soon as the order is granted, the debt cannot be enforced and executed.
The problem is however that people are abusing this just to stay execution.
A person can apply to the court for an administrative order to be cancelled, but it takes a lot
of time and convincing, unless you can prove conclusively to the magistrate that you are
able to pay your debts.
Attorneys are normally appointed as administrators, but it can be any person with a good
sense of money, for example an accountant.
74 Granting of administration orders
(1) Where a debtor-

(a) is unable forthwith to pay the amount of any judgment obtained against him in court, or to meet his
financial obligations, and has not sufficient assets capable of attachment to satisfy such judgment or
obligations; and
(b) states that the total amount of al his or her debts due does not exceed N$50 000,
such court or the court of the district in which the debtor resides or carries on business or is employed may, upon
application by the debtor or under section 65I, subject to such conditions as the court may deem fit with regard to
security, preservation or disposal of assets, realization of movables subject to hypothec (except movables referred
to in section 34 bis of the Land Bank Act, 1944 (Act 13 of 1944), or otherwise, make an order (in this Act called an
administration order) providing for the administration of his estate and for the payment of his debts in instalments
or otherwise.
(2) An administration order shall not be invalid merely because at some time or other the total amount of the debtor's
debts are found to exceed the amount referred to in paragraph (b) of subsection (1), but in such a case the court
may, if it deems fit, rescind the order.
[Sec 74 amended by sec 19 of Act 40 of 1952, sec 2 of Act 14 of 1954, sec 27 of Act 93 of 1962, sec 12 of Act 19 of 1963 and
sec 29 of Act 94 of 1974 and substituted sec 6 of Act 63 of 1976 and amended by sec 5 of Act 9 of 1997.]
Page 51 of 59
11. Schemes and Arrangements
The Section 311 procedure exists for a company to negotiate and reach a binding agreement
with its members or creditors with a view to modifying their claims in the common interest
of all parties concerned. Section 311 therefore creates the machinery which enables a
company to negotiate with the members of a group of shareholders and/or creditors
collectively and then to bind all the members of that group to the agreements reached by
the majority of members of that group. The main object of Section 311 is to rearrange the
company's liabilities by compromise.
The application of Section 311 is not limited to companies which are insolvent. A
compromise contemplated by Section 311 is of the widest character and the only limitations
are that the scheme cannot authorise something contrary to the law or ultra vires the
company. The compromise is made between (1) the company and its creditors (as a whole)
or any class of them; (2) the company and its members or any class of them; or (3) the
company and any combination of creditors and members or any class of them.
"Compromise" means an agreement between the persons referred to above which

terminates a dispute about either the rights of the parties which are to be compromised or
some difficulty in enforcing such rights. When a compromise is proposed, any of the
following persons can approach the Court for an order to convene a meeting of the
creditors (or class of creditors) or members (or class of members) to consider the proposal:
the company itself; any creditor of the company; any member of the company; the
liquidator of a company being wound up, which includes the provisional liquidator; or the
(provisional) judicial manager of a company under judicial management. The application is
made ex parte.
Page 52 of 59
311 Compromise and arrangement between company its members and creditors
(1) Where any compromise or arrangement is proposed between a company and its creditors or any class of
them or between a company and its members or any class of them, the Court may, on the application of
the company or any creditor or member of the company or, in the case of a company being wound up,
of the liquidator, or if the company is subject to a judicial management order, of the judicial manager,
order a meeting of the creditors or class of creditors, or of the members of the company or class of
members (as the case may be), to be summoned in such manner as the Court may direct.
(2) If the compromise or arrangement is agreed to by-
(a) a majority in number representing three-fourths in value of the creditors or class of creditors;
or
(b) a majority representing three-fourths of the votes exercisable by the members or class of
members,
(as the case may be) present and voting either in person or by proxy at the meeting, such compromise or
arrangement shall, if sanctioned by the Court, be binding on all the creditors or the class of creditors, or
on the members or class of members (as the case may be) and also on the company or on the liquidator
if the company is being wound up or on the judicial manager if the company is subject to a judicial
management order.
(3) No such compromise or arrangement shall affect the liability of any person who is a surety for the
company.
(4) If the compromise or arrangement is in respect of a company being wound up and provides for the
discharge of the winding-up order or for the dissolution of the company without winding up, the
liquidator of the company shall lodge with the Master a report in terms of section 400(2) and a report as
to whether or not any director or officer or past director or officer of the company is or appears to be
personally liable for damages or compensation to the company or for any debts or liabilities of the
company under any provision of this Act, and the Master shall report thereon to the Court.
(5) The Court, in determining whether the compromise or arrangement should be sanctioned or not, shall
have regard to the number of members or members of a class present or represented at the meeting
referred to in subsection (2) voting in favour of the compromise or arrangement and to the report of the
Master referred to in subsection (4).
(6) (a) An order by the Court sanctioning a compromise or arrangement shall have no effect until a certified
copy thereof has been lodged with the Registrar under cover of the prescribed form and registered by
him.
(b) A copy of such order of court shall be annexed to every copy of the memorandum of the company
issued after the date of the order.
(7) If a company fails to comply with the provisions of subsection (6)(b), the company and every director
and officer of the company who is a party to the failure, shall be guilty of an offence.
(8) In this section "company" means any company liable to be wound up under this Act and the expression
"arrangement" includes a organization of the share capital of the company by the consolidation of
shares of different classes or by the division of shares into shares of different classes or by both these
methods.
Page 53 of 59
12. Deregistration and Winding-up
12.1. Deregistration
When you deregister a company, it still exists as a legal entity. The shareholders can trade
as an entity similar to a sole trader or partnership. However, when you trade as such you
don’t trade as a separate legal entity. The practical aspect of this is that, even if you
deregister, any member may still do business on behalf of this deregistered entity, but can
be held personally liable. Thus when a company is deregistered the liability (if any) of every
director, officer and member of the company continues and may be enforced as if the
company had not been deregistered
Deregistration is the process whereby a formal end is put to a company which has become defunct. It is
defined as the cancellation by the registrar of the registration of a company’s memorandum and
articles; and, in the case of an external company, as the cancellation by the registrar of the registration
of its memorandum. Deregistration is to be distinguished from dissolution, which takes place either
after the winding-up of a company or when the court provides for the dissolution of the transferor
company after a reconstruction or amalgamation. Both deregistration and dissolution put an end to the
corporate existence of a company, but their purposes and certain of their consequences are different. In
so far as the registrar is empowered to deregister defunct companies on his own initiative, the purpose
of deregistration is in part punitive, that is, to give the registrar an effective remedy against defaulting
companies. But even then the legislature’s intention is not to punish anyone other than the company.
On the contrary, the Companies Act recognises that other persons might be harmed and it affords them
the widest possible relief.
Blackman MS “Companies” in Joubert WA (ed) LAWSA Vol 4(3) First Reissue 1996 Durban Butterworths at 88
12.2. Winding-up
Winding-up on the other hand is similar to liquidation and is when the directors are relieved
from their duty, the assets of the business are sold, creditors are paid, etc.
(1) When the company is in financial difficulty, the creditors would apply.
Page 54 of 59
(2) If the business of the company is run in such a bad manner that it clearly needs to be
wound up.
(3) If the company, at the instance of its members or creditors, applies for voluntary
winding-up.
Winding-up or liquidation (the terms are used indiscriminately) is the process by which, prior to its
dissolution, the management of a company’s affairs is taken out of its directors’ hands, its assets are
ascertained, realised and applied in payment of its creditors according to their order of preference, and
any residue distributed among its members according to their rights. The company’s corporate
existence is then put to an end by the formal process of dissolution.
There are two modes of winding-up: voluntary winding-up and winding-up by the court.
A winding-up by the court is initiated by an application to court by the company or a creditor or a member or
the master or the judicial manager or the minister. A voluntary winding-up is initiated by a resolution of the
company. A voluntary winding-up may be either (i) a creditors’ voluntary winding-up; or (ii) a members’
voluntary winding-up. The fundamental difference between a creditors’ and a members’ voluntary winding-up
is that in a members’ voluntary winding-up security is given for the payment of the company’s debts and, the
interests of its creditors having been thus protected, the winding-up is conducted subject to the directions of
the members. In a creditors’ voluntary winding-up, on the other hand, no security is furnished for the payment
of the company’s debts, and the winding-up is therefore conducted subject to the control of the creditors.
12.3. Procedure for winding-up
12.3.1. Voluntary winding-up
A company can only be wound up voluntarily if a reason other than insolvency exists. A
special resolution in terms of section 349 must be passed. This resolution must state that it
is a voluntary resolution. It must also give the name of the person to be appointed as
Page 55 of 59
liquidator.123 A certified copy of the resolution(s) must be lodged with the Master of the
Supreme Court124 within 28 days after the registration in terms of section 200.
Before the special resolution is passed, security must be furnished to the satisfaction of the
Master. The Master can waive the security if the directors, by way of sworn affidavit,
declare that the company has no debts and if the auditors of the company declare that to
the best of their knowledge and according to the records of the company it has no debts.
The company must give notice of its intention to apply for winding up. This notice must be
published in the Government Gazette within 28 days after registration of the special
resolution. A copy of the resolution must also be sent within fourteen days by the Registrar
to the Sheriffs, Registrars and Messengers.
A voluntary winding-up commences at the time of registration of the special resolution.

From the date of commencement, all the powers of the directors cease except insofar as
their continuance is sanctioned by the liquidator in a general meeting.
If it is an application by the members, a special resolution is required. The members, in an

application by the creditors, must draft a statement of affairs (CM100) and then an ordinary
resolution must be passed.
12.3.2. Winding-up by the court
The application for winding up of a company by the courts is set out in section 346.
According to subsection (1), an application to the Court for the winding-up of a company
may, subject to the provisions of this section, 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;
123
A liquidator can be appointed by a separate ordinary resolution.
124
Probably the Master of the High Court – the Companies Act refers to “court” as the South West Africa
Division of the Supreme Court of South Africa.
Page 56 of 59
(d) jointly by any or all of the parties mentioned in paragraphs (a) , (b) and (c) ; or
(e) in the case of any company being wound up voluntarily, by the Master or any
creditor or member of that company.
Every application to the Court referred to in subsection (1), except an application by the
Master in terms of paragraph (e) of that subsection, shall be accompanied by a certificate by
the Master, issued not more than ten days before the date of the application,125 to the
effect that sufficient security has been given for the payment of all fees and charges
necessary for the prosecution of all winding-up proceedings and of all costs of administering
the company in liquidation until a provisional liquidator has been appointed, or, if no
provisional liquidator is appointed, of all fees and charges necessary for the discharge of the
company from the winding-up.126 The requirement that security be given is absolute127 and
issue of the certificate is only dependent on whether security has been given or not.128
Before an application for the winding-up of a company is presented to the Court, a copy of
the application and of every affidavit confirming the facts stated therein shall be lodged
with the Master, or, if there is no Master at the seat of the Court, with an officer in the
public service designated for that purpose by the Master by notice in the Gazette. The
Master or any such officer may report to the Court any facts ascertained by him which
appear to him to justify the Court in postponing the hearing or dismissing the application
and shall transmit a copy of that report to the applicant or his agent and to the company. 129
There must be proof of lodgement. “The practice...is that the Master or officer furnishes a
report...; this report is filed with the papers and constitutes the requisite proof of
lodgement.”130
125
See Meskin “Henochsberg on the Companies Act” 2006 Service Issue 23 at 722(2): the certificate does
not need to exist at the date of application (the date the application is signed and ready to be filed
with the Registrar). As long as the certificate is not stale, ie dated more than ten days before the
application date.
126
Section 346(3) verbatim.
127
Meskin “Henochsberg on the Companies Act” 2006 Service Issue 23 at 722(2).
128
Meskin “Henochsberg on the Companies Act” 2006 Service Issue 23 at 723.
129
Section 346(4) verbatim.
130
Meskin “Henochsberg on the Companies Act” 2006 Service Issue 23 at 724.
Page 57 of 59
Application for winding up of a company by a court is initiated by a notice of motion,
founding affidavits, as well as the certificate of the Master.131 The certificate of the Master
must not be issued more than ten days before application is made. In this certificate, the
Master must confirm that sufficient security has been given to cover all fees and charges
necessary for the prosecution of all winding-up proceedings and of all costs of administering
the company in liquidation until a provisional liquidator has been appointed, or, if no
provisional liquidator is appointed, of all fees and charges necessary for the discharge of the
company from the winding-up.132
A copy of the application and all affidavits must be lodged with the Master’s office.133 The
application must set out the capital, main business and nature of the company, the
company’s registered office, as well as the locus standi of the person bringing the
application and the grounds upon which application is made.134 If the company applies for
the winding up, the deponents to the affidavits must be authorised by a decision of the
company to do so on behalf of the company.135
131
See discussion above and Cilliers et al Cilliers & Benade Korporatiewe Reg 3ed (2001) at 509.
132
See section 346(3) and Cilliers at 510.
133
Section 346(4)(a) and Cilliers at 510.
134
Cilliers et al Cilliers & Benade Korporatiewe Reg 3ed (2001) at 510.
135
See Cilliers et al Cilliers & Benade Korporatiewe Reg 3ed (2001) at 510.
Page 58 of 59
Other References:
Koep & Partners Legal Framework: Namibia (November 2006) Prepared for the
Development Bank of Southern Africa
Justice Training Centre Forms of Business Enterprises Course Notes for Practical Legal
Education
Justice Training Centre The Law of Insolvency (1999) Course Notes for Practical Legal
Education
Page 59 of 59

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BUSINESS ENTITIES IN NAMIBIA

The aim of this course is the following:

3.2. Pros and Cons

There are various pros and cons of this type of entity:

4.2. Pros and cons

4.3. Types of Partnership

There are three different types of partnerships:

A partnership agreement does not need to be registered. It can be in writing or concluded

4.5. Rights of Partners

4.6. Legal identity of partnerships

Partner A Partner B Partner C

4.8. Remuneration of the partners

5.2. Pros and Cons

When registering a CC, the following steps need to be followed:

(a) Get a Power of Attorney from your client.

Companies and Patents Registration Office How to Register a Business in Namibia

5.5. Pre-incorporation contracts

There are certain requirements when entering into a pre-incorporation contract:

(a) It must be entered into before incorporation.

39 Payment by corporation for members' interests acquired

40 Financial assistance by corporation in respect of acquisition of members' interests

Section 40 is the CC-equivalent of section 38 of the Companies Act. In terms of section 38 of

5.7. The Association Agreement and Constructive Notice

45 No access to or constructive notice of association agreement

5.8. Representation of a close corporation

54 Power of members to bind corporation

5.9. Application of certain sections of the Companies Act

5.10. Piercing the veil of a corporation

65 Powers of Court in case of abuse of separate juristic personality of corporation

Whenever a Court on application by an interested person, or in any proceedings in which a corporation is

6.2. Different types of companies

 Companies with share capital;

6.3. Pros and cons

When registering a Company, the following steps need to be followed:

(a) Get a Power of Attorney from your client.

Companies and Patents Registration Office How to Register a Business in Namibia

6.5. Pre-incorporation contracts

35 Power as to pre-incorporation contracts

(a) It must be entered into before incorporation.

6.6. Capital maintenance

75 Company may alter share capital and shares

(1) A company having a share capital may, if-

84 Reduction of capital confirmed by Court

85 Creditors and objections to reduction of capital

86 Powers of Court as to order confirming reduction of capital

87 Special provisions as to special resolutions for the reduction of capital

89 Publication of reduction of capital

90 Offences as to reduction of capital

If any director or officer of a company-

(1) No company shall directly or indirectly make a loan to-

228 Disposal of undertaking or greater part of assets of company

6.7. Constructive notice and ultra vires acts

36 Acts ultra vires the company not void

When it appears, whether in winding-up, judicial management or otherwise, that any

424 Liability of directors and others for fraudulent conduct of business

6.9. The protection of minority shareholders

252 Member's remedy in case of oppressive or unfairly prejudicial conduct

7.2. The purpose of a business trust

7.3. Formation of a business trust

When forming a business trust, the following steps need to be followed:

7.3. Types of trusts

7.4. The taxation of trusts

When a group of professionals, like engineers, accountants or lawyers, approach you to

53 Memorandum may contain special conditions and may provide