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Close corporations

Close corporations. HOOFSTUK 27. Membership & Member’s interest. CC = 1 – 10 members (section 28) No joint membership of the same member’s interest allowed. Requirements for membership. Only natural persons- section 29(1)

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Close corporations

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  1. Close corporations HOOFSTUK 27

  2. Membership & Member’s interest • CC = 1 – 10 members (section 28) • No joint membership of the same member’s interest allowed

  3. Requirements for membership • Only natural persons- section 29(1) • Juristic person MAY NOT directly/indirectly hold a member’s interest • CC MAY have shares in a company • CC MAY enter into partnerships with other CC’s or companies.

  4. Natural person qualifies for membership if: • Entitled to a member’s interest • In his official capacity as trustee of a testamentary trust – provided that?? • In his official capacity as trustee, administrator, executor/curator of a insolvent, deceased/mentally disordered member’s estate or his representative

  5. In his official capacity as trustee of a trust inter vivosprovided that: • No juristic person is a beneficiary of the trust • Member shall have all the rights and obigations of a member • CC not obliged to respect agreement between the trust and the member • Persons entitled to benefit + members of the CC may not exceed 10

  6. Juristic persons may qualify for membership … Section 29(2)(b)&(c) • In an official capacity as trustee of a testamentary trust – but?? • In an official capacity as trustee, administrator, executor/curator of a insolvent, deceased/mentally disordered person.

  7. Commencement of membership • Date of registration of founding statement • Particulars in FS • New member or new representative = CK 2 (Amended founding statement)

  8. Register of members • No formal register • FS must contain all names members • FS open for inspection at registered office • Latest FS = register of members • Member’s names must be stated in every business letter

  9. Addisional members • Person can buy a % members’ interest • Agreement with exiting members • Contribution may be money or property, not services – sec 33(2)

  10. Cessation of membership • Voluntary disposal of member’s interest • Forced disposal of member’s interest due to insolvency • Disposal of deceased member’s interest in terms of his will • Forced disposal of his member’s interest after attachment and sale of the interest in execution • Deregistration/ Liquidation and consequent dissolution

  11. By an order of the court • Grounds: • Inability • Prejudicial effect • Impossible for members to work together • Just and equitable circumstances

  12. Member’s interest • Contribution = member’s interest • No joint holders • Member’s interest must be a single interest • % member’s interest set out in FS and certificate of member’s interest • % member’s not =% contribution

  13. Aggregate of member’s interest • 100% • New member/retirement – % of respective members’ interests must be adjusted to retain 100%

  14. Nature of member’s interest • Members are not owners of the CC’s assets • Member’s Interest is a personal right against the CC, entitling the holder to a pro rata share in the aggregate of the members’ interests and to participate in distribution of profits and on liquidation, in distribution of the remaining asset • Movable, incorporeal object • Capable of attachment

  15. Acquisition from existing member • From CC or • Existing member or his/her estate

  16. Insolvency or Death • Curator or executor must sell member’s interest • Insolvency {section 34(1)&(2)} = Sell to? • Sale to outsider if? • Death {section 35} = disposal in terms of the association agreement • If no such agreement = to heir or legatee

  17. Attachment and sale in execution • To CC, to existing members or an outsider who qualifies for membership

  18. Transfer of a member’s interest • Any transfer = amended founding statement (CK 2) • Act stipulates no method of transfer

  19. Security by means of member’s interest • Right of action can be used as security • Cession in securitatemdebiti • Alexander NO v Standard MerchandBank

  20. Pledge: • Membership certificate + form + intention to retain until payment • Non-payment = sell member’s interest to settle debt • Act contains problems

  21. Out-and-out security cession: • Cessionary undertakes to cede the interest back to the cedent once the debt has been satisfied • Only if cedent defaulted = cessionary may sell or register interest in his name • Consent issue • Juristic persons issue

  22. SCHWARTZ NO v PIKE AND OTHERS

  23. Kanakia v Ritzhelf 1004CC t/a Passage to India

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