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I require an opinion on South African company law. In

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Good Day. I require an...
Good Day. I require an opinion on South African company law. In particular banking in a Close Corporation
Submitted: 7 months ago.Category: South Africa Law
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Answered in 33 minutes by:
11/22/2017
Lawyer: Freddie Lombard, Attorney replied 7 months ago
Freddie Lombard
Freddie Lombard, Attorney
Category: South Africa Law
Satisfied Customers: 2,812
Experience: Practicing attorney and conveyancer with 16 years post article experience.
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Hi I'm Freddie,

Welcome to Just Answer. Thank you for your question. I am reviewing it now and will post a reply here ASAP.

Regards

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Lawyer: Freddie Lombard, Attorney replied 7 months ago

How can I help you?

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Customer reply replied 7 months ago
Dear Freddie. The question relates to a deceased estate and a Close Corporation. A quick background....Father , estranged wife and three adult children . The father is in the last three or so years of his terminal battle with Parkinson's disease and gives his eldest son, membership of his cc and sole signing rights to it's finances. The father has a Testament that includes all three children as well as his ex wife. When the man passes away the estate becomes the new owners of the cc, proportionally to the stipulations of the Will. The eldest son (X) is also appointed Executor and now has three roles...Executor, beneficiary and , of course, member and financial controller of the cc. After a few months the heirs are incorporated into the cc and the payouts are negotiated and settled. However concerns are raised by two members that the financial status of the cc may may not have been in order. The first concern is the flow of any income and "expenses, loans" etc. within this functionally dormant entity in the years leading to the mental incapacitation and ultimate death of the father . The new members are subsequently denied access to any historical financial information. In addition the members are also denied access to the same financial information from the time of death to their incorporation as members. Son X and his legal representative are now pushing to close the matter as the members agreed to the settlement , even though said reservations were lodged. Would you please advise on the legal options available to the concerned members in terms of conducting an audit of the Close Corporation so that they may assess its financial goings-on at the time of death and in the period leading to their incorporation(which includes the sale of two houses). Perhaps you also have a thought on Son X's acquisition of rights to his father's money and possessions whilst the father was suffering from a terminal brain disorder. Thanks a regards .John
Lawyer: Freddie Lombard, Attorney replied 7 months ago

Good day John,

OK, the long and short of it is that the "new" members of the CC has no right to any information prior to their becoming members of the CC, or, to put it differently, they may ask for the information, and they might have a right to the information, BUT they have no claim against the corporation prior to their appointment as members.

So, whatever happened in the corporation before they became members is not really applicable to them. Their claim starts when they became members.

I have no idea how it happened that son X acquired the father's rights and approval to handle the finances, but in the absence of some evidence that the father was, at the time of giving the rights to the son, mentally incapable, such transfer of rights will be a completed fact.

I hope this answered your question.

I know it will take an extra minute of your time to rate my service, but if you do not rate it, I do not get paid by the website so I would really appreciate it if you would be so kind as to rate my service positively. Feel free to ask further questions here on this topic at no extra cost if you need more information.

Regards

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Customer reply replied 7 months ago
Hi Freddie. Thanks for the response. Does this mean that even though the "contents"of the estate (and cc) belonged to the heirs from the moment of the father's death, the son could dispose of anything before the new members were incorporated? It doesn't seem correct that a member can plunder a company before a dead partner's heirs arrive to collect his share? Surely the Son is obliged to restrict all expenses to the running of the cc and can be held liable for any frivolous expenses or drawings. I will gladly do the survey. Thanks and regards John
Lawyer: Freddie Lombard, Attorney replied 7 months ago

Yes, certainly, the executor must ensure that the heir's interests are protected. So, from the date of death, the heirs have a vested interest. Their right to become members start on that date, and their claim will start on that date.

More importantly, however, is that the matter was settled. That ends the matter, and there will be no further claims either way.

Regards

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