Chapter 16

Question 1

Close corporations are governed by which Act?

Answer 1

Close Corporations Act 69 of 1984

Question 2

CCs are suitable for _____ businesses

Answer 2

Small

Question 3

How many members can a Close corporation have?

Answer 3

Between 1 and 10 members.

Question 4

Existing close corporations can
continue indenitely or may convert to companies (with the written consent of
at least ________ of the members’ interest in the corporation).

Answer 4

75%

Question 5

How do new members acquire their members interests?

Answer 5

New members acquire their members’ interests either from an existing member, or by making a contribution, in the form of money or other assets, to
the corporation. In the latter event, the percentage of the member’s interest of the new member is agreed with existing members and the interests of existing
members are reduced proportionately.

Question 6

The Close Corporations Act provides two main remedies for members against other members, namely:

Answer 6

1. the termination of the offending member’s membership by an order of court in terms of s 36; and
2. assistance from the court where a member or members have been guilty of unfairly prejudicial conduct in terms of s 49.

Question 7

S36 : Order of court

Answer 7

Section 36 allows any member of a close corporation to apply for a court order to the effect that any member, including the applicant him- or herself, will cease to be a member of the corporation

Question 8

S49 : Unfairly prejuducial conduct

Answer 8

The remedy under s 49 of the Close Corporations Act is available to a person who is being unfairly prejudiced as a result of a single act or omission by the corporation or one or more of the members. It is also available with reference to the way in which the affairs of the corporation are being or have been conducted.

Question 9

The Act imposes two specific duties on members towards the corporation as follows:

Answer 9

1. a fiduciary duty;
   and
2. a duty of care and skill.

Question 10

Section 65: Abuse of separate juristic personality of
corporation

Answer 10

Section 65 of the Close Corporations Act provides that a court has very wide powers to ignore the existence of a close corporation and to lift the
corporate veil in cases where there is found to be ‘gross abuse’ of the close corporation as a separate legal entity.