Close Corporations

Question 1

CC Act?

Answer 1

CC Act 69 of 1984.

In operation from 1/01/1985

Question 2

CC Act no longer applicable after?

Answer 2

Company Act effective in 2008

Question 3

Formation?

Answer 3

Sec 19: Reserve name

Sec 12: Register founding statement(CKI)

Question 4

Membership and CC requirements?

Answer 4

• 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

Question 5

Members interest: acquisition requirements

Answer 5

-New member has new interest or seeks
to pursue a contribution.
-Agreement determines %
-Other members’ interest are reduced proportionally

Question 6

Sec 24 of CCA

Answer 6

• contributions can be in form of money, assets, labor, etc,
• contributions can be raised/ reduced by agreement.
• Processed in 90 days

Question 7

90 days of processing requires?

Answer 7

• registration of CC

- Registration of amended founding statement.

Question 8

Failure in contribution causes?

Answer 8

Personal liabilty in terms of sec63(b) of CC ‘s debts from registration of founding statement

Question 9

Tranferring interests causes could be?

Answer 9

-member is insolvent
- siezure and sale in execution.
-Death
-Court order
-

Question 10

Solvency and liquidity?

Answer 10

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.

Question 11

Sec 40

Answer 11

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.

Question 12

Failure to comply with sec 39 and 40 results in?

Answer 12

-Members are jointly and severally liable with the CC for the CC’s debts.

Question 13

Payment to member requires?

Answer 13

• Payment in capacity of member
• Similar to share distribution by company.
• S&L
• In compliance with sec 51

Question 14

Internal relations relates to?

Answer 14

-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.

Question 15

Internal relations: sec 40

Answer 15

Association agreement

-No right for 3rd-party inspection except existing members , new or whatever else is implied in the new agreement.

Question 16

Variable provision:-

Answer 16

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.

Question 17

Sec 47 of CCA Act?

Answer 17

Persons disqualified from management of CC

Question 18

Sec 48(1)

Answer 18

Any member may by notice call a meeting of members for any purpose disclosed in the notice.

Question 19

Sec 42

Answer 19

Fiduciary duties:

-Each member has a fiduciary relationship to the CC

Question 20

Members of CC

Answer 20

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

Question 21

Duty of care and skill

Answer 21

standard service: reasonable expectation of member.

Question 22

Sec 49

Answer 22

unfair , prejudicial, unjust and inequitable actions deemed practiced by other members must be escalated by court.

Question 23

Sec50

Answer 23

-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.

Question 24

Sec 2(4)

Answer 24

CC has the capacity and power of a natural person .

Question 25

Sec 54

Answer 25

Any member of CC is an agent of CC to persons who are not a member of the CC.

Question 26

Sec 54

Answer 26

It is a member’s fiduciary duty to represent the CC.

Question 27

Personal liability

Answer 27

e. g of liabilities to CC
- Failed contribution
- Non compliance with section 39 and 40
- accounting officer position vacant for >5 months

Question 28

Pre-contract agreements: sec 53

Answer 28

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