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Legal Talk

Legal Talk

Author: Fawzia Khan
Date: 2018-04-20

Appointing the right person to run your business after your demise

One of the anomalies in law is the concept of a 'person'. All human beings are regarded as natural persons. Entities such as a company, trust or close corporation are also considered to be 'persons', albeit "juristic or legal persons". A legal person can sue or be sued in its own name. Even if there is only one shareholder or director in the company, a company is seen to being distinct from its shareholder/s.

What happens if a person dies without a will and the person (deceased) was the sole shareholder and director of the company Who would be considered to be temporarily in charge of the running the affairs of such a company and make decisions around the operation of the business A Russian businesswoman, 'Roza', who lived in Moscow, was the sole shareholder and director of a company in South Africa. Roza died in Russia in August 2013 and left no will, nor did she leave any documentation to say how her estate in South Africa was to be dealt with. She had two daughters whose relationship with each other was acrimonious at best. 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".

In this case there was no appointment of an executor to deal with Roza's affairs and those of her company. The attorney acting for one of Roza's daughters applied to be appointed as executor, but failed to file security to the Master. There was also an objection to his appointment by the other daughter on the basis of conflict of interest, and he was not appointed. The Court said that until such time as Letters of Executorship have been granted, an interim curator must be appointed. The Court rejected his arguments and 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 and ensure that you have a valid will drawn up. Talk to us about amending your MOI and/or drafting or updating your will.

The Law Desk of Fawzia Khan & Associates.

Email fawzia@thelawdesk.co.za or call 031 - 502 5670 for any legal assistance at competitive rates.