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) 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.

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

In his official capacity as trustee of a trust inter vivos provided 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

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.

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

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

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

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

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

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

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

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

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

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

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

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

Security by means of member’s interest Right of action can be used as security Cession in securitatem debiti Alexander NO v Standard Merchand Bank

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

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

SCHWARTZ NO v PIKE AND OTHERS

Kanakia v Ritzhelf 1004CC t/a Passage to India