closed corporations

characteristics

less expensive, simpler, more flexible than partnership, CC suitable for informal sector

difference between CC and Co

simpler legislation, no director or AGM, member’s interest replaces share capital, solvency and liquidity replace capital maintenance, each member can bind, accounting officer replaces auditor, fewer criminal sanctions, magistrate court has jurisdiction

CC conversion to CO

notice of conversion and effect of conversion on legal status and CC cannot be a subsidiary

formation and membership

cooperation agreement, 1-10 members, natural person and no joint holders of interest unless married in community of property

membership

acquisition of members interest, making a contribution and take a transfer of an existing members interest, deceased estate or insolvent estate

legal nature of member’s interest

expressed as %, not necessarily proportional to capital contribution, outlined in founding statement and issued certificate

transfer of members interest

transferable in manner stated in act. in terms of association agreement or with permission of all members, disposition of person who qualifies for membership or to CC, acquisition by CC must have other members

personal liability

members become joinly and severally peronally liable for CC debts when CC doesnt have CC, member omits contributions, members interest is wrong, payment not according to section 39, financial aassistance given contrary to section 40, member participates in mangement and the accounting officer has been vacant for 6 months

negligent personal liability

reckless, or grossly negligent is tested based on subjectivity and objectivity

piercing corporate veil: CC

Airport cold storage vs ebrahim due to misue of legal personality

internal relations

variable rules that can be changed by management and which person are disqualified from management

asociation agreement

not legally required, advised and amendable, founding statement is compulsory, cannot change disposal of insolvent members interest, disqualifications from management and meetings, rules about disposal of members interest and fidicuary duties can be changed in association agreement

accounting officer

within 28 days and recorded in founding statement, access all records and remuneration, determine whether financial statements match year end accounting records