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Mike Otis
Mike Otis, Legal Advisor
Category: South Africa Law
Satisfied Customers: 2085
Experience:  B.Comm; LL.B; LL.M.
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I have been involved in a family business for the past 15 years.

Resolved Question:

I have been involved in a family business for the past 15 years. I have some shares in the CC. However the "main member" always "bulldoze" his ideas onto the other members. Only his opinion matters. It has become an increasingly unbearable situation to deal with. Do you have any suggestions?
Submitted: 1 year ago.
Category: South Africa Law
Expert:  Mike Otis replied 1 year ago.

Welcome, and thank you for your question.

Your remedy lies in sections 36 and 49 of the Close Corporations Act, 69 of 1984.

Section 36 provides for cessation of membership by order of court. Any member may apply to court for an order that any member, including the applicant, shall cease to be a member of the CC.

Generally, circumstances that would justify such an application include conduct by a member that has a prejudicial effect on the carrying on of the business, or that it is no longer reasonably possible for the other member/s to carry on the business of the CC with that member, or any other circumstances that would make it just and equitable that such a member should cease to be a member.

A break-down in the trust between the members would qualify as grounds for such an order. A break-down in the trust would typically occur if one member abuses his position and/or fails in his/her duty of care towards the CC.

A court that makes such an order that a member ceases to be a member is also empowered to make any further orders as it deems fit under the circumstances. Notably, the court will usually order that the member who ceases to be a member be compensated (paid out) for the value of the member's interest that is lost, etc.

However, such compensation would be in the discretion of the court and the court would be entitled to take into consideration the financial position of the CC (and the actual value of the interest at stake) and any other considerations that may be relevant.

Section 49 makes provision for a Court to make any Order it deems fit, restricting the prejudicial conduct committed to other members of the Corporation. The grounds for such an application are:


(a) If any act or omission of the corporation or of one or more other members is unfairly prejudicial, unjust or inequitable to him, or

(b) that the affairs of the corporation are being conducted in a manner unfairly prejudicial, unjust or inequitable to him.

If the Court finds that the conduct is unfairly prejudicial, unjust or inequitable, and considers it just and equitable, the Court may with a view to settling the dispute make such order as it thinks fit, whether for regulating the future conduct of the affairs of the corporation or for the purchase of the interest of any member of the corporation by other members thereof or by the corporation.

The application is brought by a member and he bears the onus of proving that he is entitled to the relief sought. The conduct complained of must affect the member directly and in his capacity as such and not be a personal issue between the members outside of the corporation.

A member must bring the application in the High Court and the Court has wider powers in this section than S36, since it can make any Order regulating the future conduct of the affairs of the Corporation, including the winding up of the Corporation.

Prejudicial conduct is necessary in both sections, but S36 is concerned with prejudicial conduct which is contrary to the carrying on of the business of the Corporation, whereas S49 is prejudicial conduct committed against the other members of the Corporation.

Yours faithfully,

Customer: replied 1 year ago.

Will it not be cheaper to just resign from the CC

Expert:  Mike Otis replied 1 year ago.
You could, but if the remaining members are unwilling to pay you out for your interest in the CC, you will be stuck - or you would have to forfeit any benefit and just abandon your interest.

With a court order, you will at least get some value for your interest.

Yours faithfully
Mike Otis, Legal Advisor
Category: South Africa Law
Satisfied Customers: 2085
Experience: B.Comm; LL.B; LL.M.
Mike Otis and other South Africa Law Specialists are ready to help you
Expert:  Mike Otis replied 1 year ago.
Thank you for your valued support. Thank you also for rating my answer. I trust that your matter has been resolved or is in the process of being resolved.

Should you encounter any further problems, either with the above or any future matters, please do not hesitate to contact me with your questions by clicking on my profile link, which you will find at the end of this message, or at http://www.justanswer.com/law/expert-mikeotis/.

Yours faithfully,

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