How often Close corporations is asked

Where it was asked

• Oct/Nov 202325 marks
• May/Jun 202232 marks
• May/Jun 201826 marks

The questions

1. Oct/Nov 2023, Q3.15 marks

   Lesedi and Zaza are the two members of It-out CC. When they formed the close corporation, they agreed that their respective membership contributions would consist only of cash, each being required to contribute R100 000, and these amounts were duly recorded in the founding statement. In addition to his cash contribution, Lesedi entered into a lease agreement in terms of which he rents a building he privately owns to the close corporation for use as an office. Zaza, who studies part-time at UNISA, entered into an employment contract with the close corporation requiring him to be in the office to attend to the corporation's day-to-day business. At a members' meeting, Lesedi and Zaza then decided that, because of a lack of profits generated by the business, the corporation would repay each of them five percent of their respective contributions so that they could provide for personal needs, and they further agreed that the corporation would make certain payments to them in respect of their rental and employment agreements respectively. Advise the members of It-out CC whether the proposed payments described above (the repayment to each member of five percent of their contribution, and the payments to be made in respect of Lesedi's rental agreement and Zaza's employment agreement) meet the requirements set out in the Close Corporations Act 69 of 1984.

2. Oct/Nov 2023, Q3.210 marks

   Discuss whether a close corporation is exempt from the obligation of financial reporting, and indicate whether such a corporation is obliged to have its financial statements audited.

3. Oct/Nov 2023, Q3.310 marks

   Vela is a member of Mnandi CC, a close corporation that is currently considering converting into a company and that also has a few minor legal problems. Without the members ever having discussed appointing a legal representative, Vela concludes a contract on behalf of the close corporation with an attorney, Mr Smooth, in terms of which Mr Smooth agrees to act as legal advisor and representative of the corporation for a period of twelve (12) months in return for a retainer of R20 000 per month. When the other members learned of this they were upset, since they had not been consulted before the appointment was made. They further contend that, by agreeing in an association agreement that all members must consent to contracts exceeding R10 000, they had excluded the possibility of the close corporation being bound by such an exorbitant agreement. Advise the members, with reference to relevant authority, on whether or not Mnandi CC is bound by the agreement concluded by Vela with Mr Smooth.

4. May/Jun 2022, Q3.15 marks

   Three friends, Sello, Tokelo and Bonang, want to start a business together. Sello mistakenly believes that a close corporation is exactly the same as a company. Advise Sello of the features that distinguish a close corporation from a company.

5. May/Jun 2022, Q3.2.11 mark

   Using the example given (a married man is eligible to become a member of a close corporation with no additional requirements) as a guide, state whether a woman married in community of property is eligible to become a member of a close corporation and, if so, whether any additional requirements must be met.