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Thread: Death of shareholder - no agreements - Advice appreciated

  1. #1
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    Death of shareholder - no agreements - Advice appreciated

    Hi... hopefully someone can advise.. may sound complex but not...

    Three individuals purchase 80% share in existing CC. 60% +10% +10%. The majority shareholder (60%) who paid the full 80% purchase price was abroad when sale agreement was signed. It was agreed by all (3 new shareholders, existing 20% shareholder) to update all admin, legal, contracts etc when majority shareholder returned to SA few months later. Company continued to trade when new &existing owners in interim - one shareholder in SA being proxy for abroad member. As no agreements in place yet, we make decisions & agree/disagree as a collective.
    Before he returns, he passes away suddenly... no will... no shareholders agreements etc.
    so... estranged family execute estate & sadly (for his sake) inherit all his assets...
    a) Can the 60% owned estate just come in and make calls without vote/discussion with other owners?
    b) Can they over-ride verbal agreements the four original owners made prior to the death?

    Basically, as none of the legal admin was processed in according with the clauses & deadlines set out in our purchase agreement by the existing owner, the estate have automatically cancelled our share purchase agreement and demanded the monies back from the existing owner as they say purchase agreement is in breach by existing owner.

    They did this without consulting the other two 10% shareholders of their intentions to cancel the agreement that represents all three of us and furthermore they are aware we collectively decided prior to death to wait until he returned to SA to formalise legal side. So they are aware we verbally agreed to put aside the agreement clause deadlines.

    The estate has just seen an opportunity to make lots more money and has gone for the gap. But can they?

    Help please sir... madam.... (,")

  2. #2
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    a) Can the 60% owned estate just come in and make calls without vote/discussion with other owners?
    No. This part of the Act governs this:
    "Part V : Internal Relations
    46. Variable rules regarding internal relations
    The following rules in respect of internal relations in a corporation shall apply in so far as this Act or an association agreement in respect of the corporation does not provide otherwise.
    a) Every member shall be entitled to participate in the carrying on of the business of the corporation;
    b) subject to the provision of section 47, members shall have equal rights in regard to the management of the business of the corporation and in regard to the power to represent the corporation in the carrying on of its business: Provided that the consent in writing of a member holding a member's interest of at least 75 per cent, or of members holding together at least that percentage of the members' interests, in the corporation, shall be required for-
    i) a change in the principal business carried on by the corporation;
    ii) a disposal of the whole, or substantially the whole, undertaking of the corporation;
    iii) a disposal of all, or the greater portion of, the assets of the corporation; and
    iv) any acquisition or disposal of immovable property by the corporation;

    c) differences between members as to matters connected with a corporation's business shall be decided by majority vote at a meeting of members of the corporation;

    d) at any meeting of members of a corporation each member shall have the number of votes that corresponds with the percentage of his interest in the corporation;

    e) a corporation shall indemnify every member in respect of expenditure incurred or to be incurred by him-
    i) in the ordinary and proper conduct of the business of the corporation; and
    ii) in regard to anything done or to be done for the preservation of the business or property of the corporation; and

    f) payments by a corporation to its members by reason only of their membership in terms of section 51(1) shall be of such amounts and be effected at such times as the members may from time to time agree upon, and such payments shall be made to members in proportion to their respective interests in the corporation"

    Regarding the balance of your post, you would have to be more specific about "legal admin". If I can put it this way, a purchase / sell agreement of members' interest cannot be invalidated by the absence of CIPC matters. Secondly, a breach doesn't automatically lead to a cancellation. The agreement itself should specify what will lead to it and if it doesn't, then it must be a material breach that has no scope for being rectified (or else just fix it).

    That said, if it is so that the agreement cannot be enforced and/or is void, then only the seller is a member and none of the other matters can rely on the Act for relief; you cannot have it both ways.

    Basically you need an attorney

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