Briefly, discuss the acquisition and disposal of a member's interest in a Close Corporation in light of the two cases, Davidson v Cough NO. and Others (41962/2021) 20221 ZAGPJHC and Livanos and Others v Oates and Others.
The acquisition and disposal of a member's interest in a Close Corporation (CC) can be a complicated and delicate process. Two recent cases show different issues that may arise, and how they were resolved.
In Davidson v Cough NO. and Others, the main issue was the interpretation of the CC's founding statement, which stated that members could only transfer their interests "with the prior written consent of all the members." The plaintiff argued that this clause meant that the other members had an absolute veto power over any transfer, while the defendants argued that they only had a right to refuse if the transfer was not in the best interests of the CC. The court sided with the defendants, stating that the clause had to be interpreted in context, and that the CC's fiduciary duties required them to act in the best interests of the CC as a whole.
In Livanos and Others v Oates and Others, the issue was the valuation of the member's interest. The plaintiff had offered to sell his interest to the other members for a certain price, but the defendants argued that the price was too high. They also argued that the plaintiff had breached his fiduciary duties by competing with the CC while still being a member. The court found that the plaintiff had indeed breached his duties, but also that the defendants had not acted in good faith during the negotiations. The court ordered an independent valuation of the member's interest and allowed the plaintiff to withdraw his offer to sell.
Overall, these cases show that the acquisition and disposal of a member's interest in a CC can be complicated and require careful consideration of the CC's founding statement and fiduciary duties. It is crucial to act in good faith and seek legal advice when necessary to avoid disputes and potential legal action.
In the cases of Davidson v Cough NO. and Others (41962/2021) 20221 ZAGPJHC and Livanos and Others v Oates and Others, the acquisition and disposal of a member's interest in a Close Corporation were discussed. Let's go through the key points step by step:
1. Davidson v Cough NO. and Others (41962/2021) 20221 ZAGPJHC: This case involved an agreement between two members of a close corporation regarding the acquisition of a member's interest. It was found that the agreement did not comply with the statutory requirements of the Companies Act. The court held that a member's interest can only be transferred if the agreement embodies the necessary formalities, including written consent and signature.
2. Livanos and Others v Oates and Others: This case dealt with the disposal of a member's interest in a close corporation. It was found that the disposal of a member's interest requires compliance with the close corporation's founding statement and the relevant provisions of the Close Corporations Act. The court emphasized that the disposal cannot occur without the necessary formalities being followed.
3. Acquisition of a member's interest: When acquiring a member's interest in a close corporation, it is important to ensure compliance with the statutory requirements, including written consent and proper documentation. This typically involves entering into a formal agreement that outlines the terms and conditions of the transaction.
4. Disposal of a member's interest: Similarly, disposing of a member's interest requires adherence to the close corporation's founding statement and the relevant provisions of the Close Corporations Act. This involves following the necessary formalities, such as obtaining consent from other members and executing the required documentation.
5. Legal implications: Failure to comply with the statutory requirements can result in the transaction being declared invalid or unenforceable. It is crucial for all parties involved to seek legal advice and ensure compliance with the applicable laws to avoid any potential disputes or legal challenges.
It is important to note that this is a summarization of the key points from the mentioned cases. For a comprehensive understanding, it is recommended to refer to the full judgments and seek legal advice when dealing with the acquisition or disposal of a member's interest in a close corporation.