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Thread: Repayment of CC members loan account

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    Repayment of CC members loan account

    I'm hoping somebody can advise me about this.
    I have a sizable loan account in a CC (one remaining member continues to run the enterprise), around about R900k, which I require to be repaid, at least in instalments as a large or full repayment would kill the enterprise. What legal recourse do I have for getting my money back?

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    Site Caretaker Dave A's Avatar
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    What are the terms of the loan?
    Is there a partnership agreement in place?
    The trouble with opportunity is it normally comes dressed up as work.

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    Its a matter of negotiation with the other members as well.

    you need to have a minuted meeting with the other members and work out a plan of action, which will not be detrimental to the company.
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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by Justloadit View Post
    Its a matter of negotiation with the other members as well.
    Provided there isn't already a contract formed - which could have already happened in a number of ways
    The trouble with opportunity is it normally comes dressed up as work.

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    Quote Originally Posted by Mr Kim Gouws View Post
    What legal recourse do I have for getting my money back?
    Pretty much the same as any other creditor of the company I would imagine. First negotiate, then if unsuccessful follow a legal route.

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    Thanks to everybody who responded.

    Quote Originally Posted by BusFact View Post
    Pretty much the same as any other creditor of the company I would imagine. First negotiate, then if unsuccessful follow a legal route.
    The problem is the partnership was not explicit about repayments of loan accounts. Taking the legal route will cost plenty, kill the company and I'll probably land up with about 10% of what's owed to me at best. From my research I understand that company law stipulates that profits have to be distributed to the loan account (i.e. paid out to me) at least annually according to the % share of ownership.

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    Quote Originally Posted by Mr Kim Gouws View Post
    From my research I understand that company law stipulates that profits have to be distributed to the loan account (i.e. paid out to me) at least annually according to the % share of ownership.
    That, or something similar is often a clause incorporated into the partnership agreement or MOI. I'm not sure it's explicitly covered by law governing cc's though (ie applicable if there isn't such a clause in the MOI etc.). Unfortunately the inherent weakness in this clause is there are ways to makes sure a distributable profit is never achieved, stripping potentially distributable profits via member salaries being the obvious one.

    Let's run through some factors to consider here:

    There'll be a Memorandum of Incoporation - is the issue of repayment of members loans covered there. And if yes, how?

    How have the members' loans been reported in the financial statements? Most often the member loans section doesn't just give the values, it also tends to include "additional disclosure." What is the exact wording of those additional disclosures.

    I take it you're no longer a member.
    Did you resign your membership, surrender your interest, sell your interest?
    How has this been recorded and what is the exact content of that record?
    Wording is important. For example, if you sold "all interest as a member in" the cc to another party, that would include the loan account.

    Assuming none of these things help clarify the legal position, we can then move onto the fact that your status i.r.o. the cc has changed, and along with it the status of the loan as a "member's loan" to the cc. As suggested above you can negotiate and/or sue. My suggestion would be to try negotiate first, and get how the loan is going to be repaid recorded as a contract (ie - with R900 000 on the line, take your lawyer with to meet with the members).
    The trouble with opportunity is it normally comes dressed up as work.

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