The Shepstone & Wylie Litigation team was recently involved in an application whereby an executor provided the sole heir of the estate of a majority member, holding a 55% membership interest in a Close Corporation, exclusive control over the management of the business to the exclusion of the three minority members, who held the remaining 45% membership interests shared equally among them, and in the absence of obtaining the consent of the minority members.  

Section 35 of the Close Corporations Act 69 of 1984 requires the consent of the members of the Close Corporation for the transfer of a deceased member’s interest by an executor of the deceased member’s estate to a person who is entitled thereto as legatee or heir or under a redistribution agreement. In the absence of such consent, the interest must be sold by the executor of the estate to the remaining members of the Close Corporation, or any other person who qualifies for membership.

The aforesaid application by the minority members was launched in the High Court on an urgent basis and resulted in the minority members being authorised to take sole control of the running of the business. The High Court set aside the decision of the executor to grant the sole heir exclusive control over the management of the business.