A hybrid business structure that borrows from company law and partnership law (also separate juristic person)
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Why was a new structure created?
To encourage small business (less complicated and expensive)
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What are they governed by?
Close Corporations Act 69 of 1984
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Can you still form a CC?
No - those in existence still follow CC Act but are allowed to convert to companies
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Who owns and manages a CC?
Members both own and manage CC
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Do CC's have shares?
No - there's no share capital, merely members contributions
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What do members hold in the CC?
Members hold interest not shares, expressed as a % of voting power (according to the Act the interest is still moveable, transferable property, much like shares)
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How many members may a CC have?
Min 1 and max 10
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What is a founding statement and who signs it?
Document drawn up by members looking to start a CC - signed by everyone who is to be a member
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What must a founding statement contain?
1. Name of CC 2. Address of CC 3. Name, ID no and address of each member 4. Size (%) of each interest 5. Amts of money and description and FV of any property/services contributed 6. Name of accounting officer 7. Corporations year end
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What must you do to amend the founding statement?
Lodge an amended FS with the registrar signed by/on behalf of every member and every person who will become a member - need 100% consent
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How does one inspect the founding statement?
Corporation must keep a copy of FS and prove of registration at registered office of the CC
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What does it mean that there's no constructive notice with CCs?
No person can be deemed to have knowledge of any info just because its found in the FS or any other document registered with the registrar
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What does a member have to contribute upon joining?
An initial contribution of money, property, or services rendered - included in FS
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What does interest in the CC give rise to?
Rights (distributions and voting) and duties (fiduciary duties)
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Who may be a member?
Only natural persons but trust can also as long as a juristic person isn't the beneficiary of the trust, and the total number of members including trust beneficiaries is not above 10
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How does one transfer or dispose of interest?
In accordance with the association agreement or with consent of all members
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When will a court order membership to cease?
Member incapable of carrying on business, guilty of conduct which prejudices CC, or not reasonable to expect other members to continue working with him/her
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When may a CC make a distribution to a member?
1. If after pmt assets>liabilities 2. The CC is able to pay its debts as they become due and such pmt won't render them unable to
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When may a CC buy back a members interest?
1. Written consent of every other member 2. After pmt assets>liabilities 3. CC able to pay its debts as they become due and this pmt won't change that
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When may a CC give financial assistance to a person wanting to by a member's interest?
1. Written consent of every other member (except who's int is being aquired) 2. After pmt assets>liabilities 3. CC able to pay its debts as they become due and this pmt won't change that
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How does a CC convert to a company?
File a written notice of conversion approved by at least 75% of interest held and including the company's new MOI
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What are the effects of conversion?
1. Still JP 2. All assets, liabilities, rights of CC vest in Co 3. Any legal proceedings against them may continue
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What is an association agreement?
A written agreement signed by each member which changes the default rules of the CC
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A change in the principal business carried on by the corporation requires...?
Consent in writing of at least 75%
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A disposal of the whole, or substantially the whole, undertaking of the CC requires...?
Consent in writing of at least 75%
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A disposal of all, or the greater portion of, the assets of the CC requires...?
Consent in writing of at least 75%
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Any acquisition or disposal of immovable property by the CC requires...?
Consent in writing of at least 75%
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How are differences between members as to matters connected with a corporation's business resolved?
By a majority vote at members meeting - % of interest represents member's number of votes
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When will a member be liable to the CC for loss they caused?
If they failed to act with the care and skill expected from a person of their knowledge or experience
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What type of relationship is there between a CC and a member?
A fiduciary one
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Will an act of a member bind the CC if its not performed for the carrying on of the business?
Yes - unless the member had no power and the 3rd party reasonably ought to have known that
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Other cards in this set
Card 2
Front
Why was a new structure created?
Back
To encourage small business (less complicated and expensive)
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