[Question] change in cc membership

[AmithS]

Hi All,

I have a quick Q.

If say i had 5% interest in a cc and the other partner had 95%.

Can he add other members to the cc and give them shares by himself or will both of us have to authorise it ?

Thanks,

[Dave A]

With a 5% member interest, you're pretty much along for the ride.

[eitai2001]

Firstly, there are no shares ... he can't just give them shares ... so if he was to give someone an inteterest in the corporation, he would have to give it to them out of his own members interest ... your 5% belongs only to you and in that ratio.

He will need you permission if he was to reduce your percentage.

You can see this principle from Section 33 of the CC Act:

1) A person becoming a member of a registered corporation shall acquire his member's interest required for membership -

a) from one or more of the existing members or his or their deceased or insolvent estates; or

b) pursuant to a contribution made by such person to the corporation, in which case the percentage of his member's interest is determined by agreement between him and the existing members, and the percentages of the interests of the existing members in the corporation shall be reduced in accordance with the provisions of section 38(b).

Secondly, if you have an Association Agreement specifying he has the authority to sell a part of his percentage to anyone ... then you have no choice, but if you do not have an association agreement, he needs your permission as can be seen by reference to Section 37 of the Act below:

Every disposition by a member of a corporation of his interest, or a portion thereof, in the corporation, other than a disposition provided for in section 34, section 35 or section 36, whether to the corporation, any other member or any other person qualifying for membership in terms of section 29, shall be done-

a) in accordance with the association agreement (if any); or

b) with the consent of every other member of the corporation

[AmithS]

Thanks for that eitai2001, it is exactly what i was looking for.

with regards to the 5% i am using the worst case senario for now.

Thanks guys