GUIDE TO THE MEMORANDUM OF INCORPORATION

●●A shareholder (and any other stakeholder) can therefore have a claimagainst the directors or any person who contravenes the Act for damagesfor any loss or damaged suffered as a result of that contravention – i.e theaction does not need to be fraudulent or carried out with gross negligencefor a valid claim in terms of this Section.Sections 20 and 218 of the Act enable shareholders to sue directors/officers for civil damages, or any losses suffered by them.11. TRANSITIONAL ARRANGEMENTS AND CC’S●●●●Existing CC’s at the date of implementation of the Act will continue to existindefinitely, or until such time as their members may determine that it is intheir interest to convert to a company;No new CC’s will be able to be registered, and no company converted to aCC, as of the effective date of the Act;Conversion of CC to Company●●●●From the date of operation of the Act, existing CC’s may convert to acompany by filing a Notice of Conversion together with:a) a written statement of consent approving the conversion of the CCsigned by members of the CC holding in aggregate at least 75% of themembers’ interest in the CC;b) a MOI consistent with the requirements of the Act;c) the prescribed filing fee.Every member of a converted CC is entitled to become a shareholder of thecompany, but the shares to be held in the company by the shareholdersindividually need not necessarily be in proportion to the members’ interestsas stated in the founding statement of the CC.Financial Statements and accounting records of CC’s●●●●The same requirements as per Section 28, 29, 30 of the Act apply to CC’s;The CC may also voluntarily make the enhanced accountability andtransparency provisions of Chapter 3 applicable.Business Rescue and winding up of CC’s●●Chapter 6 will also apply to CC’s (Business Rescue).Transparency and accountability of CC’sSection 10 of the CC’s Act is amended by the insertion of the following:●●Any Regulations made by the Minister in terms of Section 29(4) and (5)and 30(7) of the Companies Act 2008 will apply equally to a CC;●●Section 62 of the CC’s Act is amended to include – Section 34(2) of theCompanies Act apply to a CC, and Chapter 3 also applies to CC’s where ithas voluntarily determined to take action contemplated in Section 34(3) ofthe Companies Act.Reckless or Fraudulent Trading – Section 64 of the CC’s ActIf at any time the business of the CC is being carried on:●●recklessly, with gross negligence; or37