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Legal Talk

Legal Talk

Author: Fawzia Khan
Date: 2014-04-18
In law a company, trust or close corporation is considered to be a 'person', albeit a "juristic or legal person". A legal person can sue or be sued in its own name. Hence a company is seen to being distinct from its shareholders, even if there is only one shareholder or director in the company. 

The Companies Act 2008 governs all matters pertaining to companies. When a person dies, his or her estate has to be wound up by an executor. The executor is someone who is either appointed by the deceased in a will, or by the Master of the High Court, if there is no will. The function of the executor is to take control of all the deceased's assets and liabilities and be accountable to the Master. All property in the deceased's name including any assets to which the deceased had a right, title or interest, would be deemed to be part of the deceased's estate. 

These would include immovable and movable property, such as shares in a company. The executor is expected to administer the deceased's estate, either according to the wishes of the deceased if there was a will, or in terms of intestate laws, if there was no will. Unless a will exempts the executor from doing so, all executors have to file security, to the satisfaction of the Master, for the due and proper fulfillment of their duties. Who is in charge of the running the affairs of a company if the sole director and shareholder dies without leaving a will? 

This was the question the High Court in the Western Cape faced in April 2014. A Russian businesswoman, 'Roza', who lived in Moscow, was the sole shareholder and director of a company in South Africa. The company was in the business of growing wine grapes and making wine in the Cape. Roza died in Russia in August 2013, without leaving a will. When she died, Roza left no documentation to determine how her estate in South Africa was to be dealt with. She left behind two daughters, whose relationship with each other was acrimonious. 

There was no appointment made by the Master of the High Court to have an executor appointed to deal with her affairs and those of her company. The attorney acting for one of Roza's daughters applied for the appointment as executor, but failed to file security to the Master. There was also an objection of conflict of interest by the other daughter to such an appointment, and he was not appointed. 

The financial manager of Roza's South African company, who was neither a shareholder nor a director of the company, brought an urgent application in the High Court, asking the court to grant him rights of an "interim receiver". These rights would have enabled him to continue to operate the company and take control of the business of the company, including all assets, sales and finance of the company. 

The Court refused to grant him the order, with costs. It held that neither Administration of Estates Act 66 of 1965, nor the Articles of Association of the company allowed for the manager to have such powers and said that in doing so the manager would be usurping the functions of an executor. 

If you run a business in the name of a company in which you own 100% shares and you are the sole director, I would recommend that you include a provision in your Memorandum of Incorporation [MOI] setting out who, upon your demise, would be responsible for the running of the business. Also ensure that you have a valid will drawn up. 

Talk to us about amending your MOI and/or drafting or updating your will. Know your rights! The Law Desk of Fawzia Khan & Associates. We know! We Care! We Deliver! Email fawzia@thelawdesk.co.za or call 031-5025670 for any legal assistance.