South African Business Law : Unexpected Credit transactions? What does buying and selling shares in private companies have to do with it? Beware!

by | Jan 16, 2017 | Commercial law

South African business law is ever changing and evolving.
Ever considered a sale of shares to be a credit agreement? Well, it could very well be…

In the Vesagie matter (more fully discussed below) the court faced the question – whether an agreement of purchase and sale, which provides for interest to be payable on deferred payments, amounted to a credit transaction in terms of the National Credit Act No. 34 of 2005, as amended from time to time, (hereinafter called “the Act”).

If it does, unless the party extending the credit is registered as a credit provider in terms of the Act, the agreement is unlawful. The consequence of such a finding would be that the court will be required to declare the agreement null and avoid ab initio. Thus, there could be dire consequences.