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JP
JP, Attorney
Category: South Africa Law
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Experience:  General South African Law.
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The members of a Close Corporation each make loans to the corporation

Customer Question

The members of a Close Corporation each make loans to the corporation for purchase of assets and to cover startup costs.

How do the members claims (for the value of their loan accounts) on the corporation rate in relation to other creditors eg suppliers of goods and services to the corporation?

(I am doing a valuation of a business to assist the members in establishing a selling price and I'm not sure whether their loan accounts should be included with other current liabilities or ignored for this purpose)
Submitted: 7 years ago.
Category: South Africa Law
Expert:  JP replied 7 years ago.

Good day Customer!

 

Welcome back we have dealt with each other before.

 

The members claims on loan account is also concurrent claims with all other creditors.

 

There is therefor no preference allowed to the loan account holders or to other creditors in relation to the loan account holders and is therefor equal to each other.

 

Mark you should therefor show it as a liability!

 

This answer does not create an attorney-client relationship. Please consult a local attorney in person for legal advice. This information is being provided so you can better discuss legal matters with your attorney.

 

If you feel that this answer exceeded your expectations feel free to award a bonus.

 

Kind Regards

 

JP

Attorney

 

Customer: replied 7 years ago.
Hello Jp,

Good to talk to you again. Can you please give me the legal references for your argument ie act, section etc
Expert:  JP replied 7 years ago.

Hi again!

 

There is no section that will specifically mention that loan accounts is concurrent creditors, it is just common practice and you do not need to justify same by a section in any act.

 

This answer does not create an attorney-client relationship. Please consult a local attorney in person for legal advice. This information is being provided so you can better discuss legal matters with your attorney.

 

 

If you feel that this answer exceeded your expectations feel free to award a bonus.

 

Kind Regards

 

JP

Attorney

JP and other South Africa Law Specialists are ready to help you
Customer: replied 7 years ago.
Thanks JP, that helps a lot

Regards,

Mark Grobler
Expert:  JP replied 7 years ago.
Your welcome Mark glad i could assist!