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Thread: Selling member share

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    Selling member share

    Hi all
    I have a business that is 5 months old. It is a cc. There are 2 members. Each member has 50% share of what i don't know because we recently decided to trade seperately, each paying half the rent but all other accounts are in our own names. It is a hair salon. The assets and equipment add up to a quater of the intial investment, the assets are still being paid off and are in my personal name. one member wants to sell out for his intial investment which exceeds the assets and equipment. there is no agreement between us. he has offered his share to me which i cant afford can i offer him a price for just the assets? Can he sell his share to someone else? Do i have to agree to be with the person he has sold to? what are my rights?
    It is too much for my little brain. Ifeel out of my league. Clueless

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    Site Caretaker Dave A's Avatar
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    Who has signed the lease agreement?
    The trouble with opportunity is it normally comes dressed up as work.

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    carm (21-Aug-09)

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    Diamond Member wynn's Avatar
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    Are those assets in the cc's name or your own as you mention?
    How much is still owed on the assets? (furniture, stock, equipment etc)
    offer him half of what is paid for, don't include the initial cash/financial input that did not purchase assets. (things like money spent on advertising, teas&coffees, accounting, drycleaning, decorating etc)
    Anything else is goodwill which basically has no value.
    Any loss he suffers as a result is his school homework!

    good luck


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    carm (21-Aug-09)

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    Thank you for your help so far.

    The landlord has the signed lease, we have a copy. Assests at moment is in my own name, as hey are purchased on a foshini account, R18500 is still owed. Today he sold to his mother. She wants R70 000 which was the so called initial investment. How can i stop them from selling out to a stranger? What are my rights in a cc to protect my investment
    Last edited by carm; 21-Aug-09 at 06:11 PM.

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    Site Caretaker Dave A's Avatar
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    Strategically all you want is to buy 1% more of the cc. R70k / 50 = R1400.00. An entirely reasonable investment to obtain control of the cc. After that, who owns the other 49% is not nearly as critical If I was in your position, that would be what I'd strive for as the bare minimum.

    It would take someone more familiar with legislation or common law i.r.o. cc's to comment whether you could force this or not, or it might be covered in your articles of incorporation (please tell me you have a copy so that you can check). What you are looking for is anything related to change of members/members' interest.

    What also has me curious about this is:
    • what exactly are the assets of the cc, and
    • what is the trading nature of the cc?

    Your statement that each of you are trading separately indicates that effectively the cc may be deemed a rental company renting the premises to two sole proprietors operating their own businesses on the premises. This separation is not entirely without merit given you're in the hairdressing business. By my understanding clients have a tendency to follow the hairdresser more loyally than the salon and this structure deals with the goodwill implications of that quite neatly.

    From a posture point of view, you need to hold in your mind that your partner is in breach; it is he who wants to change the original plan and is letting his partner down. You hold the cards, and the choices going forward. Don't be intimidated into just bending to his demands.

    You may accommodate him and his wishes, but make it clear it won't be at the expense of your own interests. I'm pretty sure he's going to need your approval of the transfer of interest to his mother, but hopefully someone else will help firm that position up.
    The trouble with opportunity is it normally comes dressed up as work.

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    carm (22-Aug-09)

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    Hi dave thanks so much for the advice.
    The assets are 2 wash basins and furinture. the furniture is still being paid off. The trading nature of the business is hair and beauty and lease is in both our personal names not business. What are articles of incorporation? Is that something we draw up or is given when we register the business.

    I cant tell you how grateful I am for your advice so far. thank you

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    Site Caretaker Dave A's Avatar
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    The trading nature of the business is hair and beauty
    Now this is where you need to be careful of how you think about this. Earlier you said
    Each member has 50% share of what i don't know because we recently decided to trade seperately
    This makes a strong argument that the cc only forms a small part of the business, not the entire business.

    Overall, I am starting to believe handing this to a lawyer to fight for you is your best way forward. You've got a strong position, but you might need that extra bit of outside support to drive your position home.

    For a lawyer to take a consult, set up and take a meeting of the parties will cost a couple of thousand Rand.

    Imagine your partner getting a phonecall going "Hi, I'm carm's attorney and will be representing her in the matter of your withdrawal from your partnership with her. In an attempt to resolve this as amicably and quickly as possible, I suggest a meeting of the parties at my offices..."

    You end up thrashing this out at your attorney's offices, and you've got someone with the skills to "negotiate" and protect your interests leading the meeting.
    Last edited by Dave A; 22-Aug-09 at 12:22 PM.
    The trouble with opportunity is it normally comes dressed up as work.

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    carm (22-Aug-09)

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    thank you so much. I appreciate all the advise. i will do home work and find help

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    I will be in your business on Thursday December 3, 2009. If you haven't found help by then I will gladly assist you. There is a lot more involved in just sharing the cc name on a CK1 and 2. Partnership contracts are also supposed to be drawn up. Performance schedules as well as what responsibilities each member plays in the business must be decided. As there are only two partners or members who share equal decision making, you cannot just make a decision as to who has the right to sell or who has the right to allow the sale to take place. All of that was supposed to be set up in writing before the business commenced. It seems as though all these matters were forgotten or not known about at the commencement of the idea to do business together. He and his mother are intimidating you as they know you have very little business law knowledge. I have a client in Florentia. Your business is not far from them. I have to do a CCMA case in Kuruman on Monday. Tuesday I am serving papers on a personnel business in Crown Mines and then appearing briefly in the CCMA JHB. Wednesday, I am following up on another member of the forum (shaunshaun) as well as putting contracts into place in his business. Thursday I have to follow up on a retrenchment and outstanding CCMA case in Florentia. Friday is my day off. See you Thursday as I am in your area.

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    Platinum Member sterne.law@gmail.com's Avatar
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    Another option - go to the landlord and see if you can get a new lease in your own name!!!!!!!!!!!
    He who controls the lease is in Charge - Ask landlords
    Last edited by sterne.law@gmail.com; 28-Nov-09 at 10:53 AM. Reason: forgot sonmeting

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