In mid-May 2025, the Supreme Court of Appeal found that the members of a close corporation were members of the governing body of that juristic person and therefore that the completion of extinctive prescription had been delayed under section 13(1)(e) of the Prescription Act, 1969 whilst the debtors were members of the CC.

A dispute arose between the members of a close corporation in regard to a R4 million purchase price which had been paid to individuals rather than the CC, 11 years before the summons was served.

The objective of extinctive prescription is to create legal certainty. Section 13 does not apply only to companies and their boards.  It refers to all ‘juristic entities’. A close corporation is a separate juristic entity from its members according to the Close Corporation Act, 1984. Each member is given equal rights in regard to the management of the business and the power to represent the corporation. All members must exercise their powers and are entitled to manage the CC unless there is an internal agreement to the contrary. The law creates a legal and ethical relationship of trust between the members. The members owe a fiduciary duty to the corporation as a separate legal entity.

The purpose of section 13(1)(e) of the Prescription Act is to protect the CC from blocking actions of its members and to enhance the trust relationship between them. Although the Close Corporation Act does not expressly use the term “governing body”, section 46 outlines the functions of members in managing and controlling a close corporation. It can be concluded that the members of a close corporation comprise its governing body for the purposes of section 13. The claim had therefore not prescribed.

[Steyn and Another v Venter and Others [2025] ZASCA 59 (14 May 2025)]