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Thread: Close Corporation Members Rights

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    Close Corporation Members Rights

    I have a question regarding a close corporation, 2 members each own 25% third member owns 50%, the 1 member that owns 50% and other member that owns 25% are married. The married couple together own 75%. the CC in questions owns a piece of land with 2 houses on it. Can the 2 married members who own majority shares make decisions regarding the cc without the consent of the minority shareholder i.e. if the married couple want to see the land what can the minority shareholder do about it? The land in question is too small to sub-divide.

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    Diamond Member Justloadit's Avatar
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    If they are married in community of property, you are even deeper in the dwang.

    Voting rights generally follow the majority, so there is not much you can do.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
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    Email problem Missnancyalex's Avatar
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    Quote Originally Posted by ANGELA003 View Post
    I have a question regarding a close corporation, 2 members each own 25% third member owns 50%, the 1 member that owns 50% and other member that owns 25% are married. The married couple together own 75%. the CC in questions owns a piece of land with 2 houses on it. Can the 2 married members who own majority shares make decisions regarding the cc without the consent of the minority shareholder i.e. if the married couple want to see the land what can the minority shareholder do about it? The land in question is too small to sub-divide.
    I think Dave can have better answer on it so wait for it.
    or PM him.


    Dave I am speech less on this topic she needs your advice

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    Gold Member Mark Atkinson's Avatar
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    I refer you to Section 46 of the Close Corporations Act:

    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;
    Seems like, unless there's any provision in the Association agreement to the contrary, you're out of luck here.
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  5. Thanks given for this post:

    Dave A (16-Dec-11)

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    Diamond Member Vanash Naick's Avatar
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    There are two legal remedies for members against other members. The legal remedy applicable to your case is Section 49 of the Act. That is, if you need assistance from the court regarding unfairly prejudicial conduct.


    49. Unfairly prejudicial conduct
    (1) Any member of a corporation who alleges that any particular act or
    omission of the corporation or of one or more other members is
    unfairly prejudicial, unjust or inequitable to him, or to some members
    including him, or that the affairs of the corporation are being
    conducted in a manner unfairly prejudicial, unjust or inequitable to
    him, or to some members including him, may make an application to a
    Court for an order under this section.

    (2) If on any such application it appears to the Court that the particular act
    or omission is unfairly prejudicial, unjust or inequitable as
    contemplated in subsection (1), or that the corporation's affairs are
    being conducted as so contemplated, and if the Court considers it just
    and equitable, the Court may with a view to settling the dispute make
    such order as it thinks fit, whether for regulating the future conduct of
    the affairs of the corporation or for the purchase of the interest of any
    member of the corporation by other members thereof or by the
    corporation.
    (3) When an order under this section makes any alteration or addition to
    the relevant founding statement or association agreement, or replaces
    any association agreement, the alteration or addition or replacement
    shall have effect as if it were duly made by agreement of the members
    concerned.
    (4) A copy of an order made under this section which-
    (a) alters or adds to a founding statement shall within 28 days of
    the making thereof be lodged by the corporation with the
    Registrar for registration; or
    (b) alters or adds to or replaces any association agreement, shall
    be kept by the corporation at its registered office where any
    member of the corporation may inspect it.
    (5) Any corporation which fails to comply with any provision of subsection
    (4) shall be guilty of an offence.

  7. Thank given for this post:

    CLIVE-TRIANGLE (25-May-12), Dave A (16-Dec-11)

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    Diamond Member wynn's Avatar
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    Forumites can learn from this and similar postings.
    Negotiate the divorce before you get married!!!
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    Hi All
    Hope this is the correct area in which to pose this question.
    My husband worked in a family owned busines (closed corporation) for almost 7 years, 2.5 years ago he was given 15% interest of this business, due to issues unrelated to the business but personal he has left the company in the sense that he no longer works there. the remaining shareholders his brothers are now avoiding the payment of the 15% - what are his rights? how can he be assured he gets paid? is he owed the monetary value? it has been agreed that he will not be returning to "work"

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    with regard to profit share, should the minority 15% interest holder not be in the employ of the company (and is still waiting for the payout of his shares) be entitled to profit share ? I imagine that he would until such time as he has been paid out and his name be removed from the CC documentation - is this correct? please advise

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    Diamond Member Justloadit's Avatar
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    This would be the case in absence of a written agreement of the sale of his shares. If there is a written agreement, then there is a document which can be used to collect the outstanding monies.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
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    If the 15% shares have not yet been sold back to the brothers, then he is still entitled to a share of the dividends. However the members do not necessarily have to declare any dividends, even if they make profits. If they do declare dividends so that they can receive the funds for themselves then he is entitled to his portion.

    What he can do really depends on what agreements (written) are in place. Have the agreed to buy back his shares? Have they agreed on a price for them?

    If there is nothing he holds 15% of a cc that he can sell to whoever he wants. Problem is who wants it and what will they pay for it?

    From a shares point of view he's not in a great position of power.

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