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Hi, I wonder if anyone can help with some advice please? I have a small business (Under R2m turnover per annum) which is a Closed Corporation. I have 30% membership and the other partner has 70%. We have both signed sureties for 2 company vehicles and R100K overdraft. My partner uses the business accounts for personal use and now the business is technically R24K insolvent. I cant get him to attend meetings to address the financial issues and try rescue the business. He owns nothing and this business is his only source of income. I however have property and assets from other income and from before this company was started. Should we be held liable for all this debt, I am the only one with assets that they can attach. How can I rectify this situation or try minimize my liability? I have a number of solutions that could possibly rescue the business, if we act fast but I cant get him to attend a meeting (e.g. selling one company vehicle to at least pay back the overdraft). I am not sure if I represent a quorum when there are only 2 members - to create a paper trail in order to prove recklessness on his part. Please help! I did seek out legal advise but was quoted R4000 per hour which I cant afford at this stage.
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I went thro this about 20 years ago. Short answer is yes if you have signed personal surety - you don't even have to be a member of that business. If you signed personal surety they will come after you. -
Not sure if this is possible or would help you. Maybe get the banks to remove his authority to conduct any further transactions?Comment
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30/70 means you are sunk, I'm afraid.Comment
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Do you have a Members Association Agreement? If so, what does it say about member responsibilities, voting rights, etc.?
Not necessarily. Amongst other mitigating circumstances, it would depend on whether OP is married in community of property or not.Comment
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Fully aware of it - seems u are once again giving bad advice and stuffing up another thread !!Comment
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A personal surety is always valid however you are married. The Bank would go after the person that signed the surety (as I originally said) but would only be able to get according to how the person was married. Marriage does not stop you signing personal surety and neither does it stop the Bank or whoever might be trying to recover their money. They will come after what is legally theres according to the surety.
As I said I have been thro this about 20-25 years ago. I also signed surety (stupidly) I know exactly about the matrimonial property act. (Oh and by the way I have been married 31 years)(And I also have a pty ltd and have to face the fact that some suppliers require personal surety)
So as I have said before ..... how you might interpret some small print you may find is sometimes different to how it plays out in real life.Comment
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Hi All, thanks for the comments. Neither of us are married so its a moot point. I do know that personal surety still stands even if married - your spouse would then be liable as well if it is in community of property. You have to as Directors sign personal surety for purchasing assets so there is no way to escape it unfortunately. The vehicles could be sold to cancel out the HP loans but then no further work would be able to be done. I am concerned about the overdraft which accrues horrific interest and the debt owed to suppliers which we cant pay at the moment, we are just trying to keep head above water paying debit orders and fixed monthly operational costs. Someone suggested that I approach the bank and offer them R30K settlement (my 30%) towards the overdraft in order to remove my surety and then resign as Director/member. However, then I have absolutely no control anymore and am still liable for the loans on the vehicles and possibly some supplier agreements. The business is a great business with very little competition but one big job completely messed up our cash flow with us not being paid by a giant corporate - this is what started the initial problems which have subsequently gone from bad to worse!Comment
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Bullshit.
Just because a creditor attempts to enforce a suretyship does not mean that the suretyship is automatically valid.
So your experience from a few decades ago trumps the law? You need to work harder on your trolling.Comment
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No, its a CC so no MOI required at the time of registration.Comment
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Also, he is the "key man" in the business with the industry specific expertise and does all daily operations. I was always supposed to be a silent partner but landed up doing all the admin and business end on a part-time basis. I am concerned that I am going to be held accountable for not enforcing certain parameters. However his attitude has always been one of "I'm the majority shareholder so I make the decisions" so he is very difficult to control.Comment
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