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Thread: CLOSE CORPORATION AND DECEASED MEMBER

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    CLOSE CORPORATION AND DECEASED MEMBER

    Good day

    I am the heir of a property registered in a close corporation. I am very concerned that the Executor is going to transfer the membership of the close corporation to himself and then pay himself the dividends due on the sale of the physical property. The property was bought by the member in 1999 for R80000 and sold by the Executor (with my agreement) for R900000. He is being very cagey when I ask him what happens to the dividends and the transfer of the deceased member's shares. My accountant says that the membership should be transferred to me but the Executor says not so and is refusing to tell me how he is going to handle this transfer of shares and dividends. Please advise

    Thanks

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    Quote Originally Posted by SharJudith View Post
    I am the heir of a property registered in a close corporation. I am very concerned that the Executor is going to transfer the membership of the close corporation to himself and then pay himself the dividends due on the sale of the physical property. The property was bought by the member in 1999 for R80000 and sold by the Executor (with my agreement) for R900000. He is being very cagey when I ask him what happens to the dividends and the transfer of the deceased member's shares. My accountant says that the membership should be transferred to me but the Executor says not so and is refusing to tell me how he is going to handle this transfer of shares and dividends. Please advise
    What were you bequeathed, the share in the close corporation, or the property?
    Has the property been sold, or the close corporation?
    Is the property the only asset of the close corporation?

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    I was bequeathed the property and subsequently the property has been sold by the Executor. The property was the only asset of the Close Corporation. The Executor is being very cagey about the members share in the cc and after I prompted him to advise me if he has prepared the first Liquidation and Distribution account to be presented to the Master of the High Court, his reply was that he is still busy with it but the dividends if the close corporation must be paid out before he does the submission to the Master. He is withholding information as to who actually gets the dividends because the way I see it the dividends come from the profit from the sale of the property and then should get paid back into the Estate which in my mind should then come to me? Would this be correct?

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    SharJudith, sorry to just butt in....

    Although the devil is always in the detail, I am not sure how the deceased person could bequeath a property to you that he didn't own. His members interest could have been bequeathed, but not the assets of the close corporation.

    The close corporations Act in Sec 35 deals with what happens to a close corporation upon the death of a member:

    Disposal of interest of deceased member
    35. Subject to any other arrangement in an association agreement, an executor of the estate of a member of a corporation who is deceased shall, in the performance of his duties-
    (a) cause the deceased member's interest in the corporation to be transferred to a person who qualifies for membership of a corporation in terms of section 29 and is entitled thereto as legatee or heir or under a redistribution agreement, if the remaining member or members of the corporation (if any) consent to the transfer of the member's interest to such person; or
    (b) if any consent referred to in paragraph (a) is not given within 28 days after it was requested by the executor, sell the deceased member's interest-
    (i) to the corporation, if there is any other member or members than the deceased member;
    (ii) to any other remaining member or members of the corporation in proportion to the interests of those members in the corporation or as they may otherwise agree upon; or
    (iii) to any other person who qualifies for membership of a corporation in terms of section 29, in which case the provisions of subsection (2) of section 34 shall mutatis mutandis apply in respect of any such sale.

    I presume the deceased was the sole member? If he was a sole member, then the executor needs to wind up and liquidate the cc because the net realised value represents the members interest and is an asset of the deceased estate. The executor needs to make decisions and undertake actions relating to the close corporation. A final dividend (which is an asset of the deceased estate) represents the liquidated value of the close corporation.

    Without knowing who the members of the cc are and without seeing the testament, that probably is the most I can say.

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    The SAICA guide to close corporations puts it this way:
    7.3 The executor of the estate of a deceased member may only, unless otherwise specified in an association agreement, transfer the deceased member’s interest in the close corporation to his legatee or heir if all the remaining members of the close corporation consent to the transfer (S35(a)).
    If such consent is not given within 28 days, the executor must sell the interest to the close corporation, or the remaining members or any other third party.
    Where the intended sale is to a third party, the close corporation and the remaining members, as in the case of an insolvent member’s interest, have right of first refusal for a period of 28 days (S35(b)).

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    Thanks for the info but not being a legal person could you just tell me one thing. My ex husband was the sole member so I suppose that is why he left me the townhouse, knowing there were no other members to account to. Please can you give it to me in baby talk! If the Executor decided to sell the members interest to someone other than me as the heir then does he have to give me as the heir 28 days notice to sell?

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    The first issue is the property. If it belonged to the close corporation then he could not have bequeathed it to you, as it was not his to do so.

    The second issue is the membership of the close corporation;
    7.3 The executor of the estate of a deceased member may only, unless otherwise specified in an association agreement, transfer the deceased member’s interest in the close corporation to his legatee or heir if all the remaining members of the close corporation consent to the transfer (S35(a)). and you claim you are the heir while it seems that you might not have been.

    After the liquidation and distribution account is produced, you have opportunity to lodge queries.

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