Badenhorst and Another v Badenhorst

The first applicant inherited a 50% member's interest in the second applicant (Cheetah Estates CC) after her husband's death in February 2020. The respondent, her late husband's brother, held the other 50% interest. The parties had never entered into an association agreement. For four years, the first applicant managed the second applicant's day-to-day business and drew a salary, while the respondent managed another entity (Midnight Spark Trading 106 CC). In September 2024, the respondent unilaterally transferred R70,000 from the second applicant's bank account to his attorneys' trust account without the first applicant's knowledge or consent. The respondent claimed the transfer was his profit share and refused to return the funds, asserting he could not steal his own money. The first applicant sought an interim interdict to prevent further unauthorised withdrawals. The respondent launched a counter-application seeking an order that neither party transact on the second applicant's account without the other's prior consent pending the outcome of a separate liquidation application.

• Whether a 50% member of a close corporation may unilaterally withdraw funds from the corporation's bank account without the consent of the other 50% member.
• Whether the requirements for an interim interdict were satisfied.
• Whether a member's unilateral withdrawal of funds under the guise of a profit share offends section 46(f) of the Close Corporation Act 69 of 1984.
• Whether the respondent's counter-application for mutual restriction on transacting should be granted.

The respondent's counter-application was dismissed. The respondent was interdicted and restrained pendente lite from making any transfers, withdrawals or payments from the second applicant's bank account without the first applicant's prior consent, pending the final determination of the liquidation application under case number 20266/2024. The respondent was ordered to pay the first applicant's costs on scale C.

A member of a close corporation may not unilaterally withdraw funds from the corporation's bank account without the consent of the other member(s), particularly where no association agreement exists and no dividend has been declared in accordance with sections 46(f) and 51 of the Close Corporation Act. Such unilateral withdrawals offend the fiduciary duties owed by members to the corporation under section 42 of the Act.

The court noted that until a dividend is agreed upon and determined in accordance with the Close Corporation Act, a member is not at liberty to make unilateral payments from the corporation's bank account under the guise of paying a profit share. The respondent's stance displayed a fundamental misunderstanding of members' rights and duties under sections 42, 46(f) and 51 of the Act.

The case reinforces the principle that members of a close corporation stand in a fiduciary relationship to the corporation and cannot treat corporate funds as their own. It clarifies that profit distributions require agreement between members in terms of section 46(f) of the Close Corporation Act and must comply with the solvency and liquidity requirements of section 51. The judgment also illustrates the application of interim interdict requirements in the context of close corporation disputes.