QUESTION 3 15 MARKS

Lucas registers a close corporation with himself, Nangula and Nangulas 17-year old daughter as members. Three years ago the High Court of Namibia granted an order in terms of the Companies Act disqualifying Nangula from being appointed as a director of a company. Lucas holds 70% of the members interest in the close corporation and Nangula and her daughter each hold 15%.

Lucas wants to ensure that he has full control over the management of the close corporation. At the advice of his lawyer, Mr Tu Klever, the parties enter into an association agreement which contains, inter alia, the following clauses:

a) Only members holding a members interest of 50% or more shall have the right to call a meeting of members.

b) No member of the close corporation will be held liable to the corporation for any loss caused by his/her failure in the carrying on of the business of the close corporation to act with the degree of care and skill that may be reasonably expected from a person of his/her knowledge and experience.

Six months later Lucas, without informing the other members, borrows money from the close corporation to buy himself a luxury car. At the same time he pays an exorbitant amount for a second-hand delivery vehicle for the close corporation; he negligently makes no effort to check that this delivery vehicle is in sound mechanical condition and after only three days the engine burns out. Nangula is very upset and calls for a meeting of the members in order to discuss these events. Lucas tells her that she has no right to call a meeting.

Answer the following questions, providing full motivations:

3.1 Was the loan agreement between Lucas and the close corporation lawful? (3)

3.2 Will the close corporation have any claim against Lucas for the damages suffered as a result of the delivery vehicles engine burning out? (9)

3.3 Is Nangula excluded from calling a meeting of members? (3)