Close Corporations Flashcards
CC Act?
CC Act 69 of 1984.
In operation from 1/01/1985
CC Act no longer applicable after?
Company Act effective in 2008
Formation?
Sec 19: Reserve name
Sec 12: Register founding statement(CKI)
Membership and CC requirements?
- 1 to 10 members who are only natural persons
- N/A for juristic persons
- Joint holders of members interest= prohibited
- CC can hold interest in a company
Members interest: acquisition requirements
-New member has new interest or seeks
to pursue a contribution.
-Agreement determines %
-Other members’ interest are reduced proportionally
Sec 24 of CCA
- contributions can be in form of money, assets, labor, etc,
- contributions can be raised/ reduced by agreement.
- Processed in 90 days
90 days of processing requires?
- registration of CC
- Registration of amended founding statement.
Failure in contribution causes?
Personal liabilty in terms of sec63(b) of CC ‘s debts from registration of founding statement
Tranferring interests causes could be?
-member is insolvent
- siezure and sale in execution.
-Death
-Court order
-
Solvency and liquidity?
Sec 39 requires:
-written consent from
every member except the one to which interest is gained from.
- payment of interest and compliance of S&L
-S&L is done only if other members are left afterwards.
Sec 40
CC may offer financial assistance (directly/indirectly) through loan, guarantee or provision of security for purposes of the acquisition of a member’s interest.
-Applicable only when all other members agree through written consent and a S&L test confirms liquidity and solvency.
Failure to comply with sec 39 and 40 results in?
-Members are jointly and severally liable with the CC for the CC’s debts.
Payment to member requires?
- Payment in capacity of member
- Similar to share distribution by company.
- S&L
- In compliance with sec 51
Internal relations relates to?
-Sec 44(1) : Association agreement:
Members of CC may at any time enter a written association agreement signed by all members to regulate any internal relationships between members. To articulate what behaviours are no consistent with provisions in the CC Act.
Internal relations: sec 40
Association agreement
-No right for 3rd-party inspection except existing members , new or whatever else is implied in the new agreement.
Variable provision:-
Association agreement concerning the internal relations of the:
- carrying on of the business
- management of business
- written consent of 75%
- payments by CC to members.
Sec 47 of CCA Act?
Persons disqualified from management of CC
Sec 48(1)
Any member may by notice call a meeting of members for any purpose disclosed in the notice.
Sec 42
Fiduciary duties:
-Each member has a fiduciary relationship to the CC
Members of CC
Must
- act in good faith
- exercise powers that he/she represents in interest and benefit of CC.
- Not exceed powers
- compete with any CC business activities
- notify all members asap when direct or indirect interest in CC
Duty of care and skill
standard service: reasonable expectation of member.
Sec 49
unfair , prejudicial, unjust and inequitable actions deemed practiced by other members must be escalated by court.
Sec50
-When member is liable to cc, other members may institute proceedings in respect of liability on behalf of CC against member after notifying other members.
Sec 2(4)
CC has the capacity and power of a natural person .
Sec 54
Any member of CC is an agent of CC to persons who are not a member of the CC.
Sec 54
It is a member’s fiduciary duty to represent the CC.
Personal liability
e. g of liabilities to CC
- Failed contribution
- Non compliance with section 39 and 40
- accounting officer position vacant for >5 months
Pre-contract agreements: sec 53
Requirements:
-Trustee/agent must conclude writing the contract within reasonable time after incorporation, contract must be ratified by all members.
-agreement for 3rd-party can be concluded
