Close corporations HOOFSTUK 27 Membership Members interest CC

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: ØNo juristic person is a beneficiary of the trust ØMember shall have all the rights and obigations of a member ØCC not obliged to respect agreement between the trust and the member ØPersons 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: ØInability ØPrejudicial effect ØImpossible for members to work together ØJust 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 1004 CC t/a Passage to India