Association buying land conveyancing update

If an association is not a universitas, then immovable property cannot at common law be registered in its name as such, for it is not a juristic or artificial person. The tests to be applied to establish whether an association is a voluntary corporation or not, that is, whether it has a persona apart from its members, are well-known. A corporate body must have perpetual succession, must be able to hold property apart from its members, must be capable of suing or being sued in its own name, must in fact be capable of acquiring legal rights and of becoming subject to legal obligations in much the same way as an ordinary human being. 

An association which successfully passes these tests is known as a corporate body at common law or a voluntary corporation. Nevertheless, even when fulfilling these requirements, it may not be able to attain corporate status legally due to legislation which forbids its formation because of the objects for which it was founded. The repealed Companies Act, 61 of 1973, placed a restriction on the number of partners or members of an association formed for carrying on business for the acquisition of gain. Section 8(3) of the New Companies Act 71 of 2008 states that an association of persons formed for the purpose of carrying on any business, that has for its object the acquisition of gain by the association or its individual members, may not be a company or other form of body corporate unless it is registered as a company under the Act (or is formed pursuant to another law; or was formed pursuant to Letters Patent or Royal Charter before 31 May 1962). This provision, which is the equivalent of section 31 of the old Companies Act 61 of 1973 makes it clear that, where an association is formed for the acquisition of gain and wishes to enjoy corporate personality, it must be formally registered as a company (see Mitchell’s Plain Town Centre Merchants Association v McLeod 1996 (4) SA 159 (A)). Thus a ‘company’ formed for profit remains precluded from becoming a body corporate at common law by simply conducting itself as a legal person (see Morrison v Standard Building Society 1932 AD 229).

Various other statutes prohibit the carrying on of certain business or activities by any persons or associations unless registered in conformity with their particular statutes, for example, banking, insurance, pension fund, friendly society, and so forth.

An unincorporated association, often referred to as a voluntary association, as has already been said cannot at common law have immovable property registered in its name because legally it has no separate or distinct existence apart from its members. In the Cape Province and Orange Free State legislation came to the rescue of such associations by Act 3 of 1973 (C) and Law 4 of 1892 (OFS), which permit the registration of immovable property in the names of trustees or office-bearers who hold such property for the members of the association. These Acts specifically provide that there is no need for outgoing trustees or office-bearers to transfer such property to their successors in office. In terms of the Cape Act certain of the associations therein enumerated must have a membership of not less than 25. 

The law in the Western Cape and Free State is thus to some degree defined, but in the former Transvaal and KwaZulu-Natal there are no similar provisions. Nevertheless, the practice has developed, no doubt as an extension from the Cape and the Free State, of registering immovable property in the name of trustees for the time being. The provision regarding 25 members or more can, of course, be applied only in the Cape. The legality of this method of registration was called to account, as far as Natal is concerned, in the case Group Areas Development Board v Hurley 1961 (1) SA 123 (A). 

As we have seen from section 31 of the old Companies Act, since 1939, no corporate body which has for its object the carrying on of any business for the acquisition of gain by it or its members may be formed. What if an unincorporated association at common law is formed for gain? The answer seems to be that such an association, unless authorized in terms of some other law, would then become a partnership, which, however, can never consist of more than twenty members by reason of section 30 of the old Companies Act, unless formed before 1926 or after 1 May 2011, as the New Companies Act does not restrict the number of partners in a partnership. 

The question of gain is thus a material factor in regard to associations. If the constitution indicates that the association has been formed for gain, then the conveyancer should query its formation and its right to a legal existence as an association. In this connection it must be noted that the prohibition lies not against the making of a profit (provided this profit is not distributed to the members) but in having as an object the carrying on of a business for the acquisition of gain. All associations, whether they be churches, tennis clubs or dramatic societies, have to make profits, otherwise they could never continue to exist. Thus a sporting club which incidentally to its functions sells cool drinks at a profit to its members and guests at any of its sporting functions is not carrying on any business. 

An association which is a body corporate may be wound up under the provisions of Chapter XIV of the old Companies Act 61 of 1973 (see section 337). 

Regulation 44A of the Deeds Registries Act, 47 of 1937, prescribes that the practitioner who signs the preparation certificate on a power of attorney or other document accepts responsibility for the facts that the necessary authority has been obtained for the signing of such document in a representative capacity on behalf of an association and that the transaction disclosed in such document is authorized by the deed of constitution of such association. A conveyancer who prepares a deed on the authority of such a document accepts responsibility that the particulars as to the name and registered number, if any, of the association have been correctly brought forward to the deed from such document. 

In terms of regulation 44A(d)(ii)(bb), the ‘preparer’ takes responsibility that the transaction is authorized by and in accordance with the constitution of a ‘body of persons’ and no doubt an association would fall within the ambit of this description. 

The following verification should be made: 

(i)             A copy of the constitution certified a true copy of the prevailing constitution by a competent office-bearer of the association should be obtained. Every type of transaction sought to be registered must be authorized by the constitution. Thus, if the association is taking transfer of land, its constitution must reflect that the association can acquire immovable property. On the other hand, if the association is dealing with immovable property already registered in its name or on its behalf in the names of trustees, its powers of alienation including mortgage of such property must be clear in the constitution. Thus there must be expressed powers to mortgage, sell, exchange, donate, to stand as surety, and so forth. That any provisions limiting or governing these powers have been complied with must be proved. Thus, if the executive committee or the trustees are empowered to mortgage land only with the consent of the association in general meeting, a certified copy of the authorizing resolution taken at a general meeting must be obtained in addition to any certified copy of the resolution of the executive committee necessary.

The constitution must indicate clearly in whose name property both movable and immovable is to be vested. As we have seen, if the association is alleged to be a universitas, the constitution can provide that the property be vested in the name of the association as such, but it must be very apparent from the constitution as a whole that it can claim corporate status. Failing this, the constitution must provide for the vesting of property in trustees whose appointment is provided for, or in the names of office-bearers clearly designated as trustees for this purpose.

The objects of the association should disclose that it is not formed as a business for the acquisition of gain by it or its members, or this must be clear from the constitution without ambiguity. The question of gain does not affect associations formed before 1940 – (see what has been written above). 

(ii)            The power of attorney to register a transaction must be supported by a certified copy of the resolution of the executive or other committee or of the association in general meeting, as the constitution may require, appointing and empowering the signatories to sign the power. Such a resolution must give full details of the transaction, this authorization must be quoted in the recital to the power of attorney as well as the full names of the signatories.

The preamble to the deed should, however, only state that the appeared is acting on a power of attorney granted to him by the association and no mention must be made of the office-bearer(s) who signed the power of attorney or of any authorizing resolution (Chief Registrar’s Circular 8 of 1983). Of course, a constitution may provide that a power of attorney may be signed by a particular office-bearer or particular office bearers without the necessity of any authorization. In such case the particular clause of the constitution should be quoted in the power, e.g.

Peter Malan in his capacity as Chairman of the Peter Pan Association, acting herein by virtue of clause 14 of the Constitution of the said Association.”

The fact that Peter Malan is the trustee duly appointed must be proved by obtaining a certificate from the executive office of the Association.

Note that by reason of the provisions of regulation 44A referred to above the copies of resolution and constitution are not lodged with the relevant deed in the deeds office but should be retained by the ‘preparer’. 

(iii)           In the Western Cape, as discussed above, the conveyancer must satisfy himself as regards certain associations that membership consists of 25 members or more. This provision does not apply to associations for religious purposes or to schools, hospitals, libraries or museums supported wholly or in part by subscriptions or donations and ‘under the management of a committee or other board chosen by the subscribers or donors’ (section 1(2) Act 3 of 1973 (C)). 

It should be clear from the above that there are a hundred and one different ways of drafting a constitution and that difficulty will always arise in interpreting particular constitutions. This is especially true in regard to churches and religious bodies whose growth and multiplicity over centuries is reflected in the complexity of their constitutions, which often defy even their own followers’ interpretation. No purpose will be served in going into any of these because the vesting of property, as far as the main churches are concerned, has long been decided and can easily be ascertained by the conveyancer by looking up a precedent transaction in the deeds office. Many religious bodies, moreover, seem to take great joy in having extremely involved constitutions which are very often added to or subtracted from at yearly conferences so that the position varies from time to time. Many churches have a main controlling body which can acquire property while subordinate bodies or individual congregations have the same or similar powers often subject to the approval of the main body. Such approval must always be obtained. 

Any comments would be appreciated and contact me should you have any questions.

Allen West
TONKIN CLACEY PRETORIA 
012 346 1278

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