Share Blocks Control Act 1980 (Act No. 59 of 1980)14. Loan obligation of share block company |
| (1) | A share block company shall not increase its loan obligation or encumber any of its assets unless the increase or encumbrance has been approved by a resolution of at least 75 per cent in number of the members of the company, excluding from such members the share block developer, having the right to vote at the relevant meeting and holding in the aggregate at least 75 per cent of the total number of votes of all those members, but excluding from such number of votes the votes held by the share block developer. |
| (2) | The loan obligation of a share block company existing on the date of commencement of this Act or arising after that date shall be allocated to all members of the company, in accordance with the provisions of the memorandum or articles of the company or any agreement or arrangement relating to the loan obligation between the company and its members or, in the absence thereof, in the proportion of each member’s share to the total number of issued shares of the company or, if the company does not have a share capital, equally between all members of the company. |
| (3) | Any member of a share block company shall be liable to the company in respect of its loan obligation for an amount equal to that portion of the loan obligation, if any, for which he is, at the commencement of this Act, liable in respect of that loan obligation and such portion thereof as may, after that commencement, be allocated to him in terms of subsection (2). |
| (4) | Subject to the provisions of section 15, no moneys paid to a share block company in reduction or in settlement of an amount referred to in subsection (3) shall be applied— |
| (a) | if the loan obligation was incurred before the commencement of this Act, otherwise than in accordance with the memorandum or articles of the company or any agreement or arrangement relating to the repayment of that amount between the company and its members; or |
| (b) | if the loan obligation was incurred after the commencement of this Act or if the repayment of that amount is not governed by the memorandum or articles of the company or any agreement or arrangement referred to in paragraph (a), otherwise than in accordance with a resolution passed as contemplated in subsection (1). |
| (5) | The provisions of the Companies Act relating to notice and registration of a special resolution shall mutatis mutandis apply in respect of a resolution referred to in subsection (1), as if such resolution were a special resolution. |
| (6) | The provisions of subsection (1) shall not apply in respect of— |
| (a) | an increase or encumbrance contemplated in that subsection if at the time when the shares of the company were offered for subscription or sale, it was disclosed to all the members of the company and to the persons to whom those shares were offered that the company contemplated increasing its loan obligation or encumbering its assets on stated terms and conditions and the company has acted in accordance with such disclosure; |
| (b) | an encumbrance contemplated in that subsection if such encumbrance secures an existing liability comprised in the company’s loan obligation. |
| (7) | The provisions of subsection (1) shall not be so construed that the replacement of an obligation, or part of an obligation, included in the loan obligation by another is prohibited. |