THE GUNSTONS BLOG

Gunstons Attorneys. On record. Here.


Looking to purchase property from a company? Find out what important information you should know before you enter into the sale agreement

Are you entering into a sale agreement with a company?

Are you the purchaser in a sale agreement?It is a longstanding imperative of company administration that when property is the sole asset of a company or the 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 is one of which many company executives overlook. The crux of the matter is that sales which are not authorised by shareholders in this way may be nullified and thus you, the purchaser, may be prejudiced, especially if you are relying on 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.

Our advice to purchasers entering into a sale agreement with a company

Although this is the default position, a company may have a lower the percentage for the passing of special resolutions of shareholders if its memorandum of incorporation provides for this. 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.  Our advice to you when entering into a sale agreement with a company selling property is to 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 are adequate. Alternatively, and possibly more easily, we recommend that 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 you, the purchaser.

Garth Watson

Leave a Reply

Your email address will not be published. Required fields are marked *