Reckless Business Partner

[vieome]

Depending when the CC was registered , it could be affected by companies act 2008.

REF: Companies ACT 2008 https://www.acts.co.za/
Prior to its repeal, section 26(5) of the Close Corporations Act provided that if a close corporation was
deregistered while having outstanding liabilities, the persons who were members at the time of deregistration
would be jointly and severally liable for those liabilities. The New Companies Act has repealed this provision.
This removal will be an incentive for the deregistration of close corporations after 1 May 2011, but is not good
news for creditors, who previously were able to use section 26(5) as an effective tool for debt recovery. The
provisions of section 26(5) still however apply to close corporations deregistered prior to 1 May 2011.
Following the repeal of section 26(5), close corporations and companies are governed by the New Companies
Act which provides that deregistration does not affect the liability of any former director, shareholder (or
member) or any other person for any act or omission which took place before the company was deregistered.
Members who knowingly are a party to the reckless or fraudulent dealings of the close corporation will still be
personally liable for debts of the close corporation, since the provision of the Close Corporations Act providing
for this liability is unchanged. Close corporations which convert to companies will not avoid exposure to this
liability, since the New Companies Act contains similar provisions relating to companies.
In addition, a close corporation which converts to a company will be subject to the prohibition (in the New
Companies Act) against carrying on business with gross negligence and may be required by the Commission to
cease carrying on business or trading if the close corporation cannot show that it is able to pay its debts as they
become due and payable in the normal course of business.
Curiously, the provision of the Close Corporations Act which required the disclosure of the names of members
on every business letter of the close corporation, has been repealed. Similarly, the requirement in the
Companies Act No. 61 of 1973 for disclosure of the names of directors on company letterheads has not been
repeated in the New Companies Act.

[Haniel]

We have just been through something very similar, including surety ships, luckily we were 50/50 but still no majority. There are legal ways in which you can gain control of the Company, it ll depends on the MOI, and whether this can be done quickly enough to save the business. If you can prove dereliction of duty/negligence then a director can be struck off. But you do need legal advice, spending a little to save a lot may be worth it, but only you can make that call.

For us, the real threat of action against them for dereliction of duty brought them to the table and eventually a negotiated settlement. So was worth it, even thought the final legal bill was closer to R25K ;-(

[alex3215]

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.

I totally agree with this user!