We as three members of a new close corporation signed an association agreement in 1997 when we formed the CC - we all owned equal percentage of the CC. Two years later one of the members was bought out by the other two and now we both own 50% of the CC. We never signed an new Association agreement nor did we alter the existing one. The agreeement states the following: - The agreement shall continue until terminated as herein after provided and then it goes on to say - This agreement will termiante automatically upon: - the death of a member - the surrender or seqestration of a member's estate.Under the clause for termination of the business it says - Each member shall be entitled to terminate the business by giving the other members written notice of the termination of the business, in the event of: - one of the members being absent from the business for a period of 4 months in any calendar year due to illness.These are the only clauses in the agreement that deal with the termination of the contract or the business.The question is - IS this agreement still valid and enforceable even though the one member has left the CC?
Province: Western Cape
Have not tried anywhere else other than reading through the agreement
Good day. It depends on the context of the document. If "Members" in the context of the agreement means the founding members of the CC, then one could argue that it would have terminated. If, in the context of the document "Members" is defined as the members of the CC, whomever they may be at any time during the lifetime of the CC, then this agreement will still be binding on the members of the CC.You must remember that this is not a partnership that will dissolve when one of the partners leave the business. A CC will survive the change of its members on account of it being a separate legal entity, independent from its respective members.
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Thanks the agreement does not state founding members - it just states members - so that part was useful.
I am not worried about the termination of the business but more wanting to know whether I will be able to enforce other clauses of the contract even though one member has left
Obviously, without having the full agreement in front of me, it is difficult (or more accurately, near impossible) for me to tell you definitively that this agreement may still be enforced. When a new member is introduced, according to the Act, he is bound by the association agreement, which means that the agreement survives the change of members. If the agreement, however, state that it will operate until a certain event, then it will operate until that event occurs. This seems to be the case here, but it would seem to me as if this agreement would refer to the members of the CC as they were at the time whatever clause you are thinking of invoking, is actually invoked.In other words, the fact that this member has been bought out (and therefore, ceased to be a member of the CC) would not "count" as a member being away from the business of the CC, for instance. That clause can only be invoked if one of you or the remaining member is absent from the business for that time. In short, in my opinion, based on the information provided, I believe that the agreement is still enforceable, but between you and the other member only. The fact that the other member has left the CC would not have an effect on the validity of the agreement. I would appreciate it very much if you can change the rating of my service if you feel it is fair to do so. If you are not happy with the service and you would like to continue this conversation, please do so.
L.LB, Civil and criminal litigation, contracts, labour and family law
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