How do you Transfer a Deceased Interest in a Close Corporation? | Legal Articles

 

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How do you Transfer a Deceased Interest in a Close Corporation?

We often get inquiries from some of our clients with regards to how the process of transferring the interest of a deceased relative who, was a member of a Close Corporation (CC).

We value such inquiries in that it is indicative of the appreciation that our valued clients have for the law, and at the same time giving us an opportunity to directly assist where it is needed from basic to the most.

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Transfer of Members Interest in a Close Corporation – Close Corporation Act

The relevant Act makes provision and guidance for this situation. Section 35 of the Close Corporation Act 69 of 1984 (the Act) provides that the transfer of the interest of a deceased member of a CC takes the normal course as during estate administration (obviously subject to the Act and also depending on the nature of the interest or asset).

This would entail the appointed Executor in the deceased estate, effecting the transfer of the membership of the CC to the heir (at the CIPC), who qualifies to be a member of a CC as per section 29 of the Act.

However, subsection 1 (a) and (b) place a condition that the remaining members must consent to such transfer of membership to the heir, and in the event that such consent is withheld within 28 days upon its requisition, then the interest shall be sold to the corporation, other members or any other who qualify for membership of a close corporation.

Transfer of Interest in a Close Corporation

Sections 29 (2)(c) read with (3)(c) provide for the Executor requesting an amendment of the Founding Statement of the close corporation to designate him/her as a representative of the deceased member and to act in that capacity.

It must be noted that various representative capacities are mentioned in this provision and extend to persons (natural or juristic) under insolvency, curatorship, administration, legal representation etc.

In close corporations where the represented member was the sole member, the representative will then act on behalf of the corporation as envisaged under section 15 (1), as provided by 29 (3)(d).

The Executor, even before the amended founding statement is lodged, may then act as the representative of the deceased member without any rights being affected from the date of appointment as provided in (3)(e).

Such representative authority was accepted and upheld in the case of Boerboonfontein BK vs La Grange NO and Another 2011 (1) SA 58 (WCC).

To that effect, the Executor (now representative) is fully empowered to superintend and represent the interest of the deceased in as far as the affairs of the close corporation are concerned.

Van Deventer & Van Deventer Incorporated – Attorneys in Cape Town and Johannesburg

As advised above, the process of transferring the interest will be determined also by the nature of the interest itself.

In the case of immovable property being held under the ownership of a close corporation with only the deceased member, the Executor assumes the position of the seller in the transaction.

Where there are other members in the close corporation, the executor still assumes the representative role as ONE of the sellers of the immovable property.

For professional legal assistance with matters related to deceased estate, including transferring deceased interest from a close corporation, please feel free to contact our attorneys.

 

 

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