Blucher Hauman Mellet N O and Others v Marais Rocco Vermeulen and Another

The first appellant, Blucher Hauman Mellet, held a 60% member's interest in Findaload CC, a close corporation. He wanted to sell this interest to the respondents but did not want the purchase price paid directly to him. Instead, he arranged for payment to be made via the Blucher Mellet Family Trust (the Trust). The Trust entered into a Deed of Sale of Membership Interest with the respondents, purporting to sell the 60% member's interest to them. The agreement provided that Mellet would transfer his member's interest to the Trust, which would then sell it to the respondents. When the respondents failed to perform their obligations under the agreement (specifically, failing to register a bond as security for payment), the appellants sought to compel performance. The respondents counter-applied, challenging the validity of the agreement on the basis that section 29(1) of the Close Corporation Act 69 of 1984 prohibited a trust inter vivos from holding a member's interest in a close corporation.

• Whether a trust inter vivos can validly own or hold a member's interest in a close corporation under section 29(1) of the Close Corporation Act 69 of 1984
• Whether the exception in section 29(1A) of the Close Corporation Act applies to permit a trust to hold a member's interest
• Who bears the onus of proving compliance with the requirements of section 29(1A)
• Whether the agreement of sale was void ab initio and unenforceable due to non-compliance with section 29(1)

The appeal was dismissed with costs. The Supreme Court of Appeal upheld the Full Court's decision that the agreement of sale was invalid and unenforceable. The order of the court of first instance compelling the respondents to perform was therefore set aside.

Section 29(1) of the Close Corporation Act 69 of 1984 creates a clear prohibition against trusts inter vivos holding member's interests in close corporations. Section 29(1A) creates a narrow exception allowing natural or juristic persons acting as trustees of trusts inter vivos to hold such interests, subject to four specified conditions. Where a trust itself (rather than a trustee acting in that capacity) purports to hold a member's interest, this falls outside the scope of section 29(1A). The party alleging compliance with the requirements of section 29(1A)(a)-(d) bears the onus of proving such compliance with proper evidence. An agreement purporting to transfer a member's interest to or from a trust in contravention of section 29(1) is invalid and unenforceable.

The Court noted with approval the dictum in Southern African Bank of Athens Ltd v Salvadora Properties Ninety Nine CC [2010] ZAGPJHC 37 that the definition of 'member' in section 1 of the Close Corporation Act 'envisages membership of the person representing the trust and not the trust itself'. The Court also commented that the matter was not complex and did not warrant costs of two counsel, despite counsel for the respondents requesting such costs.

This case clarifies the strict interpretation and application of section 29 of the Close Corporation Act 69 of 1984. It confirms that the default position is that only natural persons may hold member's interests in close corporations, and that the exception in section 29(1A) for trustees is narrow and conditional. The judgment emphasizes that where a trust itself (as opposed to a trustee in that capacity) purports to hold a member's interest, this falls outside the scope of the exception. Importantly, the case establishes that the party alleging compliance with the requirements of section 29(1A) bears the onus of proving such compliance with proper evidence, and that mere assertions or reliance on administrative documents are insufficient. The case reinforces the principle that agreements that contravene statutory prohibitions are void ab initio and unenforceable.