Close Corporation Act 69 Of 1984

Members of a Close Corporation are in principal not liable for the debts of the CC but liability may arise, jointly and severally, with the CC in certain circumstances.

Close Corporation Act 69 Of 1984

Members of a Close Corporation are in principal not liable for the debts of the CC but liability may arise, jointly and severally, with the CC in certain circumstances.

Section 23: Use and Publication of Names

If – the registered full name or the registration number of the CC is not displayed in a conspicuous position and in characters easily legible on the outside of its registered office and every office or place in which its business is carried on, or

any member of, or any other person on behalf of, a corporation issues or authorizes the issue of any notice or official publication of the corporation, or signs or authorizes to be signed on behalf of the corporation any such bill of exchange, promissory note, endorsement, cheque or order for money, goods or services without the name of the corporation,

he shall be guilty of an offence, and shall further be liable to the holder of the bill of exchange, promissory note, cheque or order for money, goods or services for the amount thereof, unless the amount is duly paid by the corporation.

Section 26(5): Deregistration

If a corporation is deregistered while having outstanding liabilities, certain members can be personally liable for the debts of the corporation at the time of deregistration.

Section 43: Liability for Negligence

A member must act with a degree of skill that is reasonably expected from a person of his knowledge and experience or he will be personally liable for any loss caused by his actions.

Section 51: Payments by Corporation to Members

Members may be personally liable to repay certain amounts received by them if such payment is received contrary to section 51 (which provides that such loan may only be made if, after such payment is made, the corporation's assets, fairly valued, exceed all its liabilities; if the corporation is able to pay its debts as they become due in the ordinary course of its business; and if such payment will in the particular circumstances not in fact render the corporation unable to pay its debts as they become due in the ordinary course of its business).

Section 52: Prohibition of Certain Loans

Any member who authorized the issuing of a loan or was a party to such an act without the consent of the all members shall be liable to indemnify the corporation and any other person who had no actual knowledge of the contravention against any loss directly resulting from the invalidity of such loan or security.

Section 55: Upward Loans

Any member who contravenes this section by authorizing the issuing of such loan can held personally liable.

Section 63: Joint Liability for Debts of the Close Corporation

1.   If the letters CC are not used after the CC‘s name the following are personally liable:

-any member responsible for such omission;

-any member who authorized the omission;

-any member who permitted such omission.

2.   Where any member fails to pay money or to deliver or transfer property to the corporation as required by section 24 (4), that member shall be so liable Where any member fails to pay money or to deliver or transfer property to the corporation as required by for every debt of the corporation incurred from the date of registration of the founding statement in which particulars of the contribution concerned are stated to the date of the actual payment, delivery or transfer of such money or property.

3.   A juristic person or inter vivos trust cannot be a member of a CC and if this rule is breached the juristic person, trustee and any nominee of the above can be personally liable.

4.   Where the corporation makes a payment in respect of the acquisition of a member's interest in contravention of any provision of section 39, every person who is a member at the time of such payment and who is aware of the making of such payment, including a member or a former member who receives or who received such payment, shall be so liable for every debt of the corporation incurred prior to the making of such payment unless, in the case of a member who is so aware, he proves that he took all reasonable steps to prevent the payment.

5.   Where the corporation gives financial assistance for the purpose of or in connection with any acquisition of a member's interest in contravention of any provision of section 40, every person who is a member at the time of the giving of such assistance and who is aware of the giving of such assistance, and the person who receives such assistance, shall be so liable for every debt of the corporation incurred prior to the giving of such assistance unless, in the case of a member who is so aware, he proves that he took all reasonable steps to prevent the payment.

6.   A disqualified member who participates in the affairs of the corporation shall be personally liable for every debt incurred during his participation in the management of the Corporation.

7.   A corporation is required to appoint an accounting officer within six months and if that is not done the members who were aware of that omission will be personally liable for every debt of the corporation

Section 64: Liability for Reckless or Fraudulent Trading

If it at any time appears that any business of a corporation was or is being carried on recklessly, with gross negligence or with intent to defraud any person or for any fraudulent purpose, a Court may on the application of the Master, or any creditor, member or liquidator of the corporation, declare that any person who was knowingly a party to the carrying on of the business in any such manner, shall be personally liable for all or any of such debts or other liabilities of the corporation as the Court may direct, and the Court may give such further orders as it considers proper for the purpose of giving effect to the declaration and enforcing that liability.

That person may, in addition, be guilty of an offence.

Section 70: Repayments by Members and Former Members of Payments on Winding-Up

In the winding-upof a corporation unable to pay its debts, any such payment made to a member by reason only of his membershipwithin a period of two years before the commencement of the winding-upof the corporation, shall be repaid to the corporation by the member, unless such member can prove that after such payment was made, the corporation's assets, fairly valued, exceeded all its liabilities; and such payment was made while the corporation was able to pay its debts as they became due in the ordinary course of its business; and such payment, in the particular circumstances, did not in fact render the corporation unable to pay its debts as they became due in the ordinary course of its business.

Section 71: Repayment of Salary or Remuneration by Members and Former Members

Any salary received within two years of winding up must be repaid by that member if on winding upthe CC is unable to pay its debts and the salary was in the opinion of the Master not bona fide or reasonable in the circumstances. Former members can be personally if the repayments by present members are insufficient to pay the CC’s debts