Close corporation divides family
Friday, 09 December 2011 00:00
This week, the panel deals with an interesting situation involving conflict over a holiday house owned by a family in a close corporation.
The man, his wife and children are all members, but the husband recently died.
Unfortunately, his wife and one of their children took it upon themselves to go to the property, empty it out and arrange for a long-term tenant to take occupation.
According to the reader, this was not agreed upon or consented to by the other members of the CC.
He says there was, however, an existing arrangement that the other members were to have access to the home from time to time and also that a few holiday tenants could rent the house.
Regrettably, no association agreement exists between the members, which would have regulated the relationship between the members and the administration of the property owned by the CC.
The reader would like to know what remedy, if any, the affected members of the CC have against those who acted on a whim of their own. Schalk van der Merwe from Rawson Properties Helderberg says it is important to remember that the CC is considered a legal person. “Therefore, it is the CC that owns the assets, not its members.”
Mr Van der Merwe says the members, unless otherwise agreed, have equal rights to administer and represent the CC in its business dealings. “In this instance, its business is to administer and rent the property owned by it.”
Where the members have differing ideas regarding the manner in which the business is administered, he says the matter must be put to a vote.
“Each member’s representation will be weighted according to his or her interest in the CC.”
Until the deceased estate is wound up and the husband’s interest transferred or sold, the executor will vote on behalf of the estate, says Mr Van der Merwe.
“All members have a fiduciary responsibility to act in the best interests of the CC.”
When a member acts outside of his scope of authority, it is typically the CC that acts against the offending party, says Lucille Geldenhuys from Lucille Geldenhuys Attorneys in Stellenbosch.
Should a member’s actions result in damages to the CC, he or she may be liable to the entity for these damages, says Ms Geldenhuys.
“In this case, an example would be if the CC were held responsible for breaching tenants’ leases.”
She says a member can take legal action against another on the basis that that member acted in an unfairly prejudicial manner and a court would then remedy the unfair conduct.
“Such a remedy may be required by those being deprived of their rights to use the property in the agreed manner.”
Ms Geldenhuys says it should not be taken for granted that the members of a CC will always act in the manner envisaged by its founding members.
“As with any property owned either by multiple persons or by an entity controlled by multiple persons, a set of rules should be established to prevent disputes.”
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Written by Lucille Geldenhuys and Schalk van der Merwe You are reading Close corporation divides family articles
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