Mellet N O and Others v Vermeulen and Another

The appellants, trustees of the Blucher Mellet Family Trust, were involved in the sale of a 60% member’s interest in Findaload CC to the respondents. The first appellant originally held the 60% interest personally and intended that the purchase price be paid to the Trust rather than to him directly. To achieve this, the Trust was named as the seller in a written Deed of Sale of Membership Interest, which contemplated that the member’s interest would be transferred from the first appellant to the Trust and then sold to the respondents. The respondents failed to provide security for payment of the purchase price as required by the agreement. The appellants applied to compel performance. The respondents counter-applied, contending that the agreement was unlawful and void because section 29(1) of the Close Corporation Act 69 of 1984 prohibits a trust from holding a member’s interest in a close corporation unless the requirements of section 29(1A) are met.

The appeal was dismissed with costs.

The case clarifies the strict application of section 29 of the Close Corporation Act and confirms that trusts cannot hold member’s interests in close corporations unless the precise requirements of section 29(1A) are proved. It reinforces that the exception permits trustees, not trusts as entities, to be members, and that parties relying on the exception bear the onus of proving compliance. The decision underscores the importance of statutory compliance in structuring transactions involving close corporations and trusts.