Special Resolution on Property Sales

Special Resolution required to sell property

It is a longstanding imperative of company administration that when property is the sole asset of a company or a greater part of its assets and the directors acting for the Company, wish to sell it, the shareholders must pass a special resolution indicating that 75% (this is the default percentage) of the shareholders in the company agree to the sale.

“This stipulation,” says Garth Watson, a partner in the Cape legal firm Gunstons Attorneys, “is one of which many company executives overlook.” The crux of the matter, he continued, is that sales which are not authorised by shareholders in this way may be nullified and thus purchasers may be prejudiced, especially if they are relying on the terms of the sale agreement which may become void. The directors of such a company selling its property are, in the absence of a special shareholders resolution, actually prohibited from giving effect to the transfer of the property.

A Company may have a lower the percentage for the passing of special resolutions of shareholders if its memorandum of incorporation provides for this, said Watson. Companies’ Memoranda of Incorporation are so called public documents, and are available at the Companies and Intellectual Property Commission (“CIPC”) Members of the public are therefore deemed to know the contents of any company’s memorandum of incorporation. Persons entering into sale agreements with companies selling property should consult CIPC in order to check the provisions of the memorandum of incorporation in order to ensure that any required resolutions passed by the shareholders of the selling company is adequate. Alternatively, and possibly more easily, suitable conditions and warranties should be included in any deed of sale for property where it is sold. This is necessary to ensure that undue hardship is not suffered by the purchaser.

Article by: www.attorneys.co.za/

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