When Entities Are Parties to the Sale

A company or close corporation is a separate legal person — it can own property in its own name. But because a company obviously cannot physically pick up a pen, a real human being must always sign on its behalf. The critical question is: who authorised that person to do so?

Close corporations operate slightly differently: their members collectively pass a resolution authorising a specific member to act. Since the Companies Act of 2008 came into force on 1 May 2011, no new close corporations may be registered — so while many existing CCs still own or acquire property, you can no longer form a brand-new CC for this purpose.

The conveyancer carries legal responsibility for confirming that the person signing the transfer documents genuinely has authority to do so. This is why they will also ask to see the company's founding documents — its Memorandum of Incorporation — to check that nothing in the company's constitution restricts or qualifies the transaction.

An established, properly registered trust can absolutely purchase property — and many South African families and investors hold property through trusts for various planning reasons. However, the rules around when trustees may act are extremely strict, and the consequences of getting this wrong are severe.

There is also a practical financial risk: if the purchase is structured incorrectly, the South African Revenue Service may treat what was intended as a single transaction as two separate property acquisitions, potentially triggering double transfer duty — a costly mistake that could have been avoided entirely.

Sometimes someone spots the perfect property but wants to hold it in a company that hasn't been incorporated yet. The Companies Act, 2008 specifically makes provision for this situation through what are called pre-incorporation contracts.

The person who signs on behalf of the company-to-be is typically described in the agreement as acting in their capacity as representative (or trustee or agent) of a company to be formed. Once the company is incorporated, its board of directors has three months in which to:

Unlike the situation with companies, there is no equivalent legislation that validates contracts entered into on behalf of a trust that has not yet been properly established. This means the legal solution available for pre-incorporation companies simply does not exist for trusts.

The Trust Property Control Act is clear: a person appointed as trustee can only act in that capacity once the Master of the High Court has issued written authorisation naming them as trustee. Any document signed — including a sale agreement — by someone purporting to act "as trustee" of a trust that has not yet received that letter of authority is completely invalid.

A further very real financial danger is double transfer duty. SARS may look at what was intended to be a single property acquisition — to the "trustee" personally, and then onward to the trust — as two separate taxable transactions, each attracting its own transfer duty liability.

What if you find the ideal property today, but your trust won't be ready to sign for another few weeks? There is a recognised workaround — though it comes with its own caveats and requires careful drafting.

The approach involves the would-be buyer signing the original sale agreement in their own name as purchaser — not as trustee of anything. A carefully worded clause is then included compelling the seller, once the trust has been properly established and authorised, to enter into a tripartite agreement with the buyer and the trust. That tripartite agreement cancels the original sale and simultaneously records a fresh sale on identical terms, this time directly between the seller and the trust.

The original sale is cancelled and simultaneously replaced — the property passes directly to the trust in one registration event.

There is also a second structural option — a stipulatio alteri — where the buyer and seller conclude the agreement as principals for the benefit of a third party (the trust), and the trust accepts the benefit once formed. However, if the trust never comes into being or elects not to accept, the original buyer does not automatically become personally liable unless the agreement specifically says so.

Whenever a company, close corporation, or trust is a party to a property transaction, a resolution is required — a formal written record confirming that the relevant decision-makers have specifically authorised the deal and identified the individual permitted to sign the documents on the entity's behalf.

The conveyancer also carries a professional responsibility to examine the entity's founding documents — the Memorandum of Incorporation for a company, the founding statement for a CC, or the trust deed for a trust — to confirm that the entity's own rules do not place any further conditions on its ability to deal with immovable property.

Children in South Africa can own property — in fact, property transfers to a minor must always be registered in the child's own name, not in the name of a parent or guardian. However, a child's ability to enter into legal contracts depends on their age, and the rules are specific.

There is an additional layer of protection for children's property beyond the capacity question. When a minor's immovable property is to be sold or mortgaged, the Administration of Estates Act requires that the guardian obtain the prior consent of either the Master of the High Court or the High Court itself. The Master alone may grant consent where the property's value does not exceed R250,000.

Sometimes the actual buyer or seller cannot sign in person — they may be abroad, incapacitated, or acting as a formal representative of another party. In these cases, an agent signs on their behalf under written authority. This is a fundamental requirement: verbal authority to sign property documents is not sufficient.

The conveyancer's preparation certificate carries with it a professional warranty that the agent is properly authorised. This is why your conveyancer will always ask to see the original written authority — whether that is a power of attorney, a resolution, letters of executorship, or a letter of authority from the Master — before any documents are prepared.