Close Corporation - Member Resignation

[Cloud1999]

I have a CC registered in 2006 and was the only Member until June 2020.

An acquaintance of mine had a concept to develop a training course and had put together a rudimentary training guide and presentation slides. He joined the CC as a Member wherein I relinquished 50% of my Members interest to him at no costs. His contribution therefore was the learning materials and IP thereof. Noteworthy, the CC though active/in business on CIPC, never traded. As such from June 2020 we opened a bank account, secured Tax Clearance, fine tuned the material , put up a website, FB and LinkedIn presence, purchased some training and online platform licenses and applied for SETA Accreditation. The combined loan account at present stands at around R80K. Effectively the CC is well now well positioned to take its value proposition to market. Unfortunately, my relationship with the other Member has irretrievably broken down and he has elected to resign from the CC. What I need to know is what if anything is he permitted to "take"?, there are no assets or liquidity in the CC (its your typical start-up). It is my understanding the the training material and or IP, which is in the name of the CC belongs to the CC, as does the website, bank account, social media accounts etc. Can simply take everything that has been developed and put in place, including the "Trading As" name and set up shop in another corporation? His loan to the CC still needs to be ratified with proof but he states its R50K. If he demands the loan amount, who would need to pay it?

There is NO Member Association Agreement in place! What is the legal precedent in scenarios as above, considering that the provisions of the Act and juristic persons.

[Andromeda]

I have a CC registered in 2006 and was the only Member until June 2020.

Can simply take everything that has been developed and put in place, including the "Trading As" name and set up shop in another corporation? His loan to the CC still needs to be ratified with proof but he states its R50K. If he demands the loan amount, who would need to pay it?

There is NO Member Association Agreement in place! What is the legal precedent in scenarios as above, considering that the provisions of the Act and juristic persons.

The seller must first offer his interest to the existing member(s). If there are no takers he can offer his interest to 3rd parties and the remaining members cannot unreasonably refuse to accept the new members.

For there to be a loan account, there must be assets. Debits must equal credits.

I gather the accounting Officer has not prepared annual financial statements, or else the issue of loan accounts would be a recorded matter.

I advise that you involve a good lawyer.

[Cloud1999]

Thank you for your response.

In this instance the seller has not offered his interest to any party and remains a Member of the CC. What he has however proceeded to do is to seized ownership of all of the CC's intellectual Property i.e. Logo, website, SM profiles, products & services and other paraphernalia and is now trading under a Pty Ltd of which he is the sole Director. The Pty Ltd is now inadvertently (fraudulently) trading as the CC and "selling" the IP developed by the Members of the CC at its behest. There has been no resolution on his resignation from the CC or agreement reached on the dissolution of the CC. His conduct is clearly prejudicial to and in conflict with the business of the CC, who is now deprived of its brand and IP. I have consulted an attorney and lodged a Complaint with CIPC.

[Blurock]

The first lesson in any business is; Put it in writing.

Assuming that the other party has your interest (or the business) at heart is wrong. Everyone for himself when the s#!t hits the fan.
I have seen so many family businesses that were started or shares given with good intentions, but with no paperwork done. Everything is done on trust, but in essence, no-one can be trusted. memories are short and selective and misunderstandings may happen.
In a very short time the beneficiary forgets what he/she was given for free and starts acting in their own interest, sometimes to the detriment of the business.

Draw up an agreement and clarify the roles and contribution of each partner or shareholder.
Agree on remuneration and have an exit strategy. Only when all this is clear and documented (witnessed) you can start working together.
Keep proper records and be transparent in all your business deals.

This may sound pedantic, but it is the exact reason why people say that you never do business with friends or family.