When a member of the CC held personally liable for the debts of the corporation?
This question is AIRPORT COLD STORAGE (PTY) LTD V EBRAHIM AND OTHERS 2008 (2) SA 303 considered. Airport Cold Storage, a creditor of the corporation known as Sunset Beach Trading 232 CC (“Sunset Beach” or “CC”), the imported meat products and frozen vegetables to Sunset Beach on account sold and delivered during March to June 2005. In August 2005, Sunset Beach liquidated. Airport Cold Storage has claimed evidence, but in spite of any dividend received. They do therefore application to the court for the members personally liable for the debt.
Their claim is based on the following alternative statutory grounds:
1. They claim that the business of the corporation reckless driving and / or fraudulently for the purpose of cheating their creditors (Article 64 (1) of the Close Corporations Act (“Act”));
2. In the alternative, they claimed that members of the separate entity of the corporation as a legal person grossly abused (Article 65 of the Act);
3. Further alternatively, that a member of a CC person responsible can be held jointly and severally with the corporation for the debt incurred by the corporation where the position of the accounting officer is vacant for longer than 6 months (section 63 (h) of the Act ).
The court has the power to, in certain circumstances, the corporate veil and go, the members personally liable for the debts of the business. Liability under section 65 of the Act depends on the finding that there was gross abuse of the legal personality of the corporation as a separate entity. The court looked at the following evidence to determine whether members of the CC as a separate corporate entity, abuse, namely CC:
1. A formed part of what is essentially a family business, and more specifically a collection of associated family businesses;
2. business conducted from premises shared with another family business, Ehbro on an informal basis;
3. the delivery trucks and furniture that belonged to Ehbro use;
4. used the bank account of Ehbro paid for by the corporation’s own funds and to pay creditors;
5. only the debts of Zaki Meat adopted and used the profits;
6. same phone and fax use as shown on the invoices of another of the family business called Pacific Foods;
It is clear that the members have a low esteem had the separate corporate identity of Sunset Beach. The CC is clear from the above in a very informal way management with no regard for the requirements of the Act.
The court therefore found that the CC reckless management.
Although the members strive for the benefits of the separate identity of the corporation to acquire, they manage the corporation as if it were their own and without the provisions of the Act to observe or comply too. When it suited them, they have chosen to separate legal personality of the corporation to ignore. Airport Cold Storage is therefore entitled to an order in terms of section 65 of the Act which results in Sunset Beach is deemed not to be a body corporate to be. The members are therefore jointly and severally with the corporation responsible for the fees to Airport Cold Storage and the amount of R278 377.19 plus interest paid. In order to avoid the above problems, we suggest that you have a guarantee of the members of a CC (or with a company of the directors) insist before credit is granted to the corporation.
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Posted in Liability Insurance | 
Tags: accounting officer, bank account, business, debts of the business, family business, legal personality