Article by Roodepoort Attorney: LEON WOLLNIK
The recent Supreme Court of Appeal decision in Crous v Wynberg Boys High School and Others has provided important clarity on the extent of members’ liability under section 65 of the Close Corporations Act.
The Court confirmed that liability for “gross abuse of juristic personality” must be established against each member individually, and that membership alone does not automatically impute liability. In this case, while Ms Fourie’s conduct clearly amounted to gross abuse, Mr Crous’s lack of involvement meant that no personal liability could be extended to him. The Court further emphasized that fiduciary duties owed by members apply internally to the corporation itself, not to external parties, leaving creditors and contracting parties without automatic recourse against uninvolved members.
This judgment underscores the need for businesses and individuals dealing with Close Corporations to take proactive steps in protecting themselves. Adequate contractual safeguards, guarantees, or securities should be put in place to ensure that third parties are not left exposed when members fail to exercise oversight.
For those navigating the complexities of liability in Close Corporations, Wollnik and Associates Inc offers the expertise to advise on structuring agreements, securing protections, and litigating disputes where necessary. If you are concerned about exposure to risk when transacting with CCs, or wish to understand how this ruling may affect your rights and obligations, we invite you to consult Wollnik and Associates Inc for tailored guidance and professional support.
For more information, please visit our website wollnikattorneys.co.za, email us at Send email or give us a call on 011 793-4367 or Business WhatsApp: 082 773 1053
