close corporations hoofstuk 27. membership & member’s interest cc = 1 – 10 members (section...

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:InabilityPrejudicial effectImpossible 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