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.

Answer 1

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.