Added Legal Value Newsletter Volume 2 Number 3

December 2009

What about my Close Corporation when the New Companie's Act comes into opretaion?

Close corporations ‹CCs› continue to exist. They were registered in terms of the Close Corporations Act and CIPRO ‹the registering authority for companies and CCs› will still register new CCs until section 13 of the new Companies Act, 2008 comes into operation.

In terms of the CC Act, the founding documents of a CC comprise of a Founding Statement and an Association Agreement. In the new Companies Act, the role these play are replaced by a Memorandum of Incorporation ‹MOI›.

A CC may file a Notice of Conversion to convert to a company in terms of the new Companies Act. The assets, liabilities, rights and obligations of the CC continue as those of the company.

If the CC so converts, it has to adopt approve the conversion and adopt a MOI or amend its founding documents to comply with the new act.

Debtor in terms of a credit agreement may ask the court

No matter what the proceedings under a credit agreement faces, the court may be asked to assist an over indebted debtor. This is so even if the agreement is not being enforced. As long as such an agreement is being considered.

Section 85 of the National Credit Act 34, 2005 trumps all other laws in this regards. It states that despite any provision of law or agreement to the contrary, a court ‹in any proceedings in which a credit agreement is being considered› may be told that the debtor is over-indebted. The court then has a discretion to refer the matter directly to a debt counsellor or declare that the debtor is over-indebted. If it makes the latter order, it may provide further relief such as releasing the debtor from the obligation or payment terms and restructure the payment of the debt. It may also grant relief from the interest burden.

Happy Holidays

Enjoy the festive season. May it be a great one. We are looking forward to a new year full of prospects and wish you all the best as we enter the year of the South African World Cup.

Go Bafana Bafana in 2010!!

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