Asked by the Customer on 15-03-2016 15:55:32
Question posted in the General Law category relating to KwaZulu-Natal
Question posted in the General Law category relating to KwaZulu-Natal
When a member with 70 % shares decides to liquidate a close corporation...what happens to the other members that each have 10 % shares?
Does the majority share holder liquidate the company on his own without consulting the other 3 members?
Does the other 3 members have to sign off on the liquidation?
Will all staff be retrenched and contracts canceled or should the staff be reinstated under a new company name?
Does the majority share holder liquidate the company on his own without consulting the other 3 members?
Does the other 3 members have to sign off on the liquidation?
Will all staff be retrenched and contracts canceled or should the staff be reinstated under a new company name?
Message from the Attorney
Posted by Att. Patrick on 15-03-2016 17:05:40
Hi there and thank you for your question,
It does not make a difference as to the number of shareholders that are voting for something. The important thing is the number of votes that the shareholders have. As you correctly identified, the one guy has 70% of the members interest, so he has 70% of the say.
If you have a look at the association agreement (or articles of association) for the close corporation (the auditors should have a copy, or you can ask the accountants to request a copy from CIPC) you should find a section which deals with voting powers.
Essentially there are certain restricted activities that need a 50% vote by the members, alternatively a 75% vote by the members.
IF the liquidation of the close corporation needs 75% votes, then the 70% member can't actually put the close corporation into liquidation by himself. He will need one of the 10% members to vote with him.
In addition, this voting needs to take place during a members meeting! It can't just happen by the 70% member himself - by himself.
The other 3 members can challenge the liquidation by filing an affidavit at court explaining that no proper resolution was passed placing the close corporation into liquidation (obviously you would need to attach a copy of the association agreement) and also that no proper resolution is attached to the founding affidavit confirming that a resolution was actually passed.
If the close corporation is liquidated, then Yes, the staff will be retrenched and contracts cancelled.
If however the liquidator sells the business of the close corporation, then the staff can be "sold" with the business to the a company.
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.
It does not make a difference as to the number of shareholders that are voting for something. The important thing is the number of votes that the shareholders have. As you correctly identified, the one guy has 70% of the members interest, so he has 70% of the say.
If you have a look at the association agreement (or articles of association) for the close corporation (the auditors should have a copy, or you can ask the accountants to request a copy from CIPC) you should find a section which deals with voting powers.
Essentially there are certain restricted activities that need a 50% vote by the members, alternatively a 75% vote by the members.
IF the liquidation of the close corporation needs 75% votes, then the 70% member can't actually put the close corporation into liquidation by himself. He will need one of the 10% members to vote with him.
In addition, this voting needs to take place during a members meeting! It can't just happen by the 70% member himself - by himself.
The other 3 members can challenge the liquidation by filing an affidavit at court explaining that no proper resolution was passed placing the close corporation into liquidation (obviously you would need to attach a copy of the association agreement) and also that no proper resolution is attached to the founding affidavit confirming that a resolution was actually passed.
If the close corporation is liquidated, then Yes, the staff will be retrenched and contracts cancelled.
If however the liquidator sells the business of the close corporation, then the staff can be "sold" with the business to the a company.
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.
Answer Accepted
This answer was accepted on 15-03-2016 17:20:10
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