Asked by the Customer on 22-04-2015 14:53:41
Question posted in the National Credit Act Law category relating to Western Cape
Question posted in the National Credit Act Law category relating to Western Cape
Does the NCA apply to personal money loaned to family member in a CK2/Close Corporation? The money was loaned in Nember 2004.
Message from the Attorney
Posted by Att. Patrick on 22-04-2015 15:10:10
Hi there and thank you for your question,
This is a further information request. Please continue in this same question conversation so that I can see your reply.
Who was the lender in your situation? An individual, or a close corporation?
Who was the borrower? An individual, or a close corporation?
How was the lender related to the borrower? e.g. a family relationship, a member of the close corporation, etc?
When was it agreed that the loan would be repaid by? Or was there no date agreed?
Awaiting your further information.
Att. Patrick
This is a further information request. Please continue in this same question conversation so that I can see your reply.
Who was the lender in your situation? An individual, or a close corporation?
Who was the borrower? An individual, or a close corporation?
How was the lender related to the borrower? e.g. a family relationship, a member of the close corporation, etc?
When was it agreed that the loan would be repaid by? Or was there no date agreed?
Awaiting your further information.
Att. Patrick
Message from the Customer
I loaned the money into a close corporation and both my son and I hade a R50 share capital each. I resigned some time later as a member.
My son and I put the same value of funds into The business as loan accounts of the close corporation
He is my son
No date was agreed
Also the financials of the business showing both individual loan accounts have been signed off for the past two years
My son and I put the same value of funds into The business as loan accounts of the close corporation
He is my son
No date was agreed
Also the financials of the business showing both individual loan accounts have been signed off for the past two years
Message from the Attorney
Posted by Att. Patrick on 22-04-2015 19:22:10
Hi there and thank you for your question,
So what I understand is that you and your son each made a loan to a close corporation, and that the loans were recorded in the books of the close corporation as member's loans. Typically in that situation there is no date agreed for the repayment of the loans, and they are repaid as and when the close corporation is able to - but that is determined by the members.
In terms of section 4 (1)(a) as read with sections 4(2)(b)(ii) & (iii) & (iv)(aa) of the National Credit Act (http://www.acts.co.za/national-credit-act-2005/) your loans into the close corporation are not ones at arm's length, and accordingly the NCA is NOT applicable to the loans.
To recover the loaned amount, you would first need to have a look at the Founding Statement for the close corporation (the incorporation documents) to check if there are any clauses dealing with when and in what circumstances a member is entitled to recall his loan - because there may well be some limitations on this that were previously agreed to by the members...
If there is nothing in there stopping you from re-calling your loan, then you should do so, and give the close corporation 7 days to make payment. If the close corporation doesn't make the payment, you will need to sue the close corporation in the Magistrates Court (or the High Court) for the return of the money.
Are you still a member of the close corporation? If not, when you resigned was it agreed that your member's loan would be converted into an ordinary loan? If so, then you would need to demand repayment of the loan from the close corporation, give the close corporation 7 days to make payment. If the close corporation doesn't make the payment, you will need to sue the close corporation in the Magistrates Court (or the High Court) for the return of the money.
I think that there is an argument to be made that when you resigned as a member of the close corporation your member's loan AUTOMATICALLY converted into an ordinary loan - the reason for this is that you ceased to be a member!
If you are going to sue the close corporation I would suggest that you hire an attorney to assist you. I unfortunately can't refer you to a specific attorney, but I can direct you to the following two websites, www.findanattorney.co.za OR www.attorneys.co.za, where you can find a list of qualified attorneys in your area who will be able to assist you further!
If there is a part of the answer which you need more advice on, or clarity please continue in this same thread instead of opening a new question.
Att. Patrick
Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered. I hope you found my answer helpful, and you have finished asking your questions, please click on the GREEN ACCEPT button in order to mark the question as closed.
So what I understand is that you and your son each made a loan to a close corporation, and that the loans were recorded in the books of the close corporation as member's loans. Typically in that situation there is no date agreed for the repayment of the loans, and they are repaid as and when the close corporation is able to - but that is determined by the members.
In terms of section 4 (1)(a) as read with sections 4(2)(b)(ii) & (iii) & (iv)(aa) of the National Credit Act (http://www.acts.co.za/national-credit-act-2005/) your loans into the close corporation are not ones at arm's length, and accordingly the NCA is NOT applicable to the loans.
To recover the loaned amount, you would first need to have a look at the Founding Statement for the close corporation (the incorporation documents) to check if there are any clauses dealing with when and in what circumstances a member is entitled to recall his loan - because there may well be some limitations on this that were previously agreed to by the members...
If there is nothing in there stopping you from re-calling your loan, then you should do so, and give the close corporation 7 days to make payment. If the close corporation doesn't make the payment, you will need to sue the close corporation in the Magistrates Court (or the High Court) for the return of the money.
Are you still a member of the close corporation? If not, when you resigned was it agreed that your member's loan would be converted into an ordinary loan? If so, then you would need to demand repayment of the loan from the close corporation, give the close corporation 7 days to make payment. If the close corporation doesn't make the payment, you will need to sue the close corporation in the Magistrates Court (or the High Court) for the return of the money.
I think that there is an argument to be made that when you resigned as a member of the close corporation your member's loan AUTOMATICALLY converted into an ordinary loan - the reason for this is that you ceased to be a member!
If you are going to sue the close corporation I would suggest that you hire an attorney to assist you. I unfortunately can't refer you to a specific attorney, but I can direct you to the following two websites, www.findanattorney.co.za OR www.attorneys.co.za, where you can find a list of qualified attorneys in your area who will be able to assist you further!
If there is a part of the answer which you need more advice on, or clarity please continue in this same thread instead of opening a new question.
Att. Patrick
Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered. I hope you found my answer helpful, and you have finished asking your questions, please click on the GREEN ACCEPT button in order to mark the question as closed.
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