Selective Empowerment Investments 1 Ltd v Companies and Intellectual Property Commission (1325/2023) [2025] ZASCA 71 (30 May 2025)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no: 1325/2023
In
the matter between:
SELECTIVE
EMPOWERMENT INVESTMENTS 1
LIMITED
APPELLANT
and
COMPANIES
AND INTELLECTUAL PROPERTY
COMMISSION
RESPONDENT
Neutral
citation: Selective Empowerment Investments 1 Ltd
v Companies and Intellectual Property Commission (1325/2023)
[2025] ZASCA 71 (30 May 2025)
Coram:
MOKGOHLOA ADP, MOCUMIE, UNTERHALTER and KOEN JJA and NORMAN AJA
Heard:
28 February 2025
Delivered:
29 May 2025
Summary:
Public company – grounds for winding-up – failure to
comply with statutory requirements of the Companies Act
71 of 2008
(the Act) alternatively on the ground that it is just and equitable –
section 81 – application for winding-up
of a solvent company –
whether the Commission has standing to rely on the just and equitable
rubric where it failed to satisfy
the jurisdictional requirements in
section 81(1)(f) – whether the Commission is an
interested party as envisaged in section 79(3) – whether
appellant received adequate
notice for winding-up as an insolvent
company – whether appellant is insolvent.
ORDER
On
appeal from: Gauteng Division of the High Court, Pretoria (Snyman
AJ sitting as a court of first instance):
1
The appeal is upheld with costs, such costs to include costs of two
Counsel, where so
employed.
2
The order of the high court is set aside and substituted with the
following:
‘The
application is dismissed with costs, such costs to include costs of
two counsel, where so employed.’
JUDGMENT
Koen JA (Unterhalter
JA concurring):
Introduction
[1]
The
appellant, Selective Empowerment Investments 1 Ltd (Selective), has
been placed under a final winding-up order by the Gauteng
Division of
the High Court, Pretoria (the high court) at the instance of the
respondent, the Companies and Intellectual Property
Commission (the
Commission). The high court found that it was just and equitable to
do so. Selective appeals against the order[1]
with the leave of this Court.
[2]
Selective
correctly maintains that it could be wound up on the basis that it is
just and equitable to do so if it is insolvent.
The high court found
that it was insolvent. Selective contends that the high court was not
entitled to find that it was insolvent,
because: it was a conclusion
arrived at without affording the parties an opportunity to advance
arguments on the issue; and it
was a finding of fact not founded on
the evidence. These were the only issues identified by Selective in
its heads of argument
as arising for determination in this
appeal.[2]
[3]
All references to statutory provisions hereafter are to sections of
the Companies Act 71 of 2008 (the Act), unless stated
otherwise.
Where reference is made to the Companies Act 61 of 1973, it shall be
referred to as the 1973 Act.
Background
[4]
Selective
presents itself to the general public as an investment company which
primarily invests in companies listed on the Johannesburg
Stock
Exchange (JSE). It is a public company. It was established to offer
small retail investors, of whom there are approximately
26 000 across
diverse groups, with an opportunity to invest in JSE listed shares
without incurring large fees. It is said to be
owned by black and
previously disadvantaged investors.[3]
Its raison d’etre and substratum accordingly was to provide
affordable access to the JSE to these previously disadvantaged
individuals who otherwise would not have had an opportunity to invest
in listed shares on their own.
[5]
The
Commission is the regulatory authority responsible for enforcing
compliance with the provisions of the Act. It is a juristic
person
established in terms of s 185. It functions as an organ of State
within the public administration, but as an institution
outside the
public service. Its objectives, in terms of s 186(1),[4]
include the promotion of compliance with the Act and any other
applicable legislation, and the efficient, effective and widest
possible enforcement of the Act and any other legislation listed in
Schedule 4 thereto.[5]
[6]
The
functions of the Commission are various and in terms of s 187(1) to
(4)[6] include: monitoring
proper compliance with the Act; receiving or initiating complaints
concerning alleged contraventions of the
Act; evaluating those
complaints; initiating investigations into complaints; ensuring that
contraventions of the Act are promptly
and properly investigated;
issuing and enforcing compliance notices; and referring matters to
court. Specifically, the Commission,
inter alia, must promote the
reliability of financial statements by, amongst others, monitoring
patterns of compliance with, and
contraventions of financial
reporting standards, and making recommendations to secure better
reliability and compliance. In general
terms, the Commission is
tasked with providing a corporate milieu of integrity and a minimum
threshold level of responsibility
in respect of corporate entities
registered and operating in the Republic of South Africa.
[7]
The Act
imposes a plethora of compliance and other requirements on companies.
These include, amongst others: s 24(4),[7]
which requires that an up to date share register be kept and that it
be verified;[8] s 30(1),[9]
which requires the submission of audited annual financial
statements;[10] s 33(1)(a),
which requires that a company must file an annual return;[11]
s 61(7),[12] which requires
the holding of annual general meetings of shareholders; and s
214(1)(d),[13]
which prohibits false statements being prepared and issued. These
requirements seek to protect the interests of shareholders, creditors
and members of the public, and promote good corporate governance.
[8]
Section
22(1)[14] requires that a
company must not conduct its business recklessly, with gross
negligence, with intent to defraud any person, or
for any fraudulent
purpose. If the Commission has reasonable grounds to believe that a
company is engaging in conduct prohibited
by s 22(1), or is unable to
pay its debts as they become due and payable in the normal course of
business, the Commission may issue
a ‘notice to show cause’
to the company as to why it should be permitted to continue carrying
on business, or to trade,
as the case may be.[15]
[9]
If a
company to whom a notice to show cause has been issued fails, within
20 business days, to satisfy the Commission that it is
not carrying
on its business recklessly with gross negligence, with intent to
defraud, or for any fraudulent purpose as contemplated
in s
22(1), or that it is able to pay its debts as they become due and
payable in the normal course of business, the Commission
may issue a
‘compliance notice’ to the company requiring it to cease
carrying on its business or trading, as the case
may be.[16]
A compliance notice may also be issued in terms of s 171,[17]
where there is non-compliance with other provisions of the Act.
[10]
If and when
the requirements of a compliance notice have been satisfied fully, s
171(6) requires the Commission, or the Executive
Director to issue a
compliance certificate.[18] A
compliance notice remains in force until: it is set aside by the
Companies Tribunal; or a court reviews the notice; or it is
set aside
by the Takeover Special Committee; or, the Commission, or its
Executive Director, as the case may be, issues a ‘compliance
certificate’, contemplated in s 171(6),[19]
that the particular non-compliance identified has been remedied.[20]
[11]
Selective
has a long history,[21]
confirmed by the reports of various vetting committees, including the
Prospectus Vetting Committee dated 11 March 2016, and investigations
of the Commission, inter alia on 17 October 2016 and on numerous
occasions thereafter, of egregious deliberate non-compliance with,
and transgressions of, various provisions of the Act. These include:
s 22(1) – reckless trading, due to the failure to properly
maintain a share register, to comply with conditions set in
prospectuses, and to prepare annual financial statements within six
months after the end of each financial year; s 24(4) – failing
to maintain the securities register as required by s 50; s
30(1) –
failing to prepare annual financial statements on a regular basis,
within six months after the end of each financial
year, which for
Selective was 30 June; s 50(1)(b)
–
failing to maintain an accurate securities register in accordance
with the prescribed standards; s 61(7) – failing to hold
annual
general meetings (from 2014 until 2017); s 72(4)[22]
and regulation 43(2) – failing to constitute a social and
ethics committee; s 73(6)[23]
– failing to keep minutes of meetings of the audit committee
and social committee; s 86(4)[24]
– failing to fill the vacancy in the office of the company
secretary within 60 business days; s 94(6)[25]
– failing to fill vacancies on the audit committee within 40
business days after the vacancies arose; s 108(6)[26]
– failing to raise capital in terms of its prospectus; s
214(1)(d)
–
making false statements, and reckless conduct, in failing to provide
an alternative trading platform; and failing to submit
a tax return
for assessment within 12 months after the end of financial years, as
required in terms of s 66 of the Income Tax Act
58 of 1962 read with
s 25 of the Tax Administration Act 28 of 2011. It also ignored the
demand to demonstrate without delay, that it was not trading in
insolvent circumstances.
[12]
As a result, Selective was issued with notices to show cause that it
was not trading recklessly or under insolvent circumstances,
as
contemplated in s 22, on 17 October 2016 and 7 December 2017.
The notice to show cause dated 17 October 2016 in addition listed
contraventions of: s 30, regarding the failure to file the annual
financial statements for the 2014 and 2015 financial years; s
24(4)(a), the failure to raise any capital for prospectuses
registered on 23 January 2012, 16 July 2012, 16 October 2012, 16
January
2013, 25 April 2013 and 18 November 2013; and the
non-negotiability of securities held. The notice to show cause dated
7 December
2017 detailed contraventions of: s 24(4), failing to
maintain the securities register as required by s 50 which is deemed
to be a contravention of s 24(4); s 30(1), in that the 2017 financial
year statements were not prepared within six months of the financial
year end; s 61(7), the failure to convene annual general meetings
after 31 January 2014; and s 214(1)(d), relating to false
statements and reckless conduct.
[13]
Both the
above notices: recorded that they were issued in terms of s 22(2);
reminded Selective that it could apply to review the notice;
confirmed that it was required to provide the information required
to
the Commission within 20 days; and required it to show cause why it
should be permitted to carry on business or to trade. The
notices
recorded that if Selective failed, within the 20 days, to respond to
the notice or to satisfy the Commission that it is
not carrying on
business recklessly, or with intent to defraud,[27]
and is able to pay its debts as they become due in the ordinary
course of business, the Commission may issue a compliance notice
requiring Selective to cease carrying on business.
[14]
Selective does not dispute receiving these notices. Nor did it seek
to review the notices. In its response, dated 5 December
2016, it
undertook vaguely to implement ‘remedial actions.’ Yet,
in a further response on 16 January 2018, to the notice
dated 7
December 2017, it conceded that it had still not complied with
various provisions of the Act. Significantly, whilst acknowledging
the obligation to have to apply for a review if it disputed the
notices, it elected that it ‘will not, despite advice to
the
contrary, seek to review the [n]otice on these grounds at this
stage’. It has also never sought to respond in any one
of the
ways required by the Act outlined in paragraph 10 above.
[15]
When the notices to show cause were not responded to, compliance
notices, as contemplated in s 171 and s 22(3), were
issued on
16 January 2017, 19 September 2017 and 14 February 2018. The
compliance notices all advised Selective that it had
the right,
within 15 business days, to apply for an order confirming,
modifying or setting aside all or part of the notices,
confirmed that
the notices would remain in force until set aside on review or until
a compliance certificate is issued, and cautioned
that the failure to
file overdue returns may result in the deregistration of Selective.
All three compliance notices recorded,
in particular, that Selective
had failed to comply with s 30 (the failure to prepare annual
financial statements).
[16]
Selective
does not dispute receiving the compliance notices either. None was
ever reviewed and set aside as provided in s 171(5).[28]
Nor was any compliance certificate ever issued. Consequently, the
complaints listed stand. The instances of non-compliance raised
by
the Commission were, as a matter of fact, if not deemed by the Act,
not to have been remedied.
[17]
The compliance notice dated 16 January 2017 required Selective to:
submit to the Commission copies of the annual financial
statements
for 2014 and 2015 signed by the registered auditor and approved and
signed by the directors; provide reasons why the
annual financial
statements of February 2012 were not timeously prepared by the
directors; submit the minutes of the annual general
meetings and the
securities register. Selective provided draft annual financial
statements as at 30 June 2015, but these did not
comply with the
request. Selective conceded that any attempt to justify not having
timeously prepared the 2012 statement would
be untenable, so it
provided none. It provided a copy of what purported to be minutes of
the last general meeting, which was held
in January 2014, some three
years earlier. Finally, as regards the securities register it said
that it had employed Stakeholder
Data Services to assist the
directors to rectify the shareholders register and that this
‘project’ was ‘well
underway’. The Commission
points out that a copy of the register has still not been provided.
[18]
The compliance notice dated 19 September 2017 required Selective: to
provide the Commission with its annual financial
statements for the
2016 financial year (which ended on 30 June 2016) signed by the
registered auditor and approved and signed by
the directors; to
provide reasons why the annual financial statements of 30 June 2016
were not timeously prepared by the directors;
to submit the minutes
of the annual general meeting; to submit proof of compliance with s
24(4)(a); and to provide a report on how instances of
non-compliance detected during an audit would be remedied to avoid a
future repeat
of non-compliance.
[19]
A subsequent report by the inspectors of the Commission dated 7
December 2017, confirmed that Selective had not remedied
its various
defaults. Accordingly, the notice to show cause dated 7 December
2017, was issued. A further inspectors’ report
dated 14
February 2018 confirmed that Selective remained in default. It
recommended that a compliance notice should be issued to
Selective to
demand that it cease carrying on its business or trading.
[20]
The compliance notice issued on 14 February 2018, pursuant to that
recommendation, detailed the history of notices and
contraventions,
evaluated Selective’s responses, recorded clearly that the
responses were inadequate, and required Selective
to cease carrying
on its business or trading until various conditions were all complied
with. These conditions included: providing
certification that the
share register was up to date and the verification thereof completed;
submitting the annual financial statements
for the year ended 30 June
2017; submitting the notice, agenda and minutes of legally
constituted annual general meetings; and,
as regards false statements
and reckless conduct, to provide proof of the existence of an
alternative platform to trade in the
securities issued by Selective.
Failing compliance with any one condition, the Commission would apply
for the winding-up of Selective.
[21]
The second judgment maintains that there was proper compliance with
reference to an isolated statement, dated 9 September
2020 (some
three months after the date of the founding affidavit) from the
Commissioner CIPC, which refers to the receipt of ‘annual
returns’ for Selective for the years 2013, 2014, 2015, 2016,
2017, 2018 and 2019. It maintains further that this has not
been
placed in issue in the Commission’s replying affidavit and must
be accepted as correct and any allegations that at the
time the
matter was heard by the high court there were outstanding annual
financial statements, must be rejected. I respectfully
disagree.
[22]
Courts decide matters on the allegations in the affidavits. The
replying affidavit, in three instances at the outset,
namely in
paragraphs 6, 9 and 10 deny the allegations in the answering
affidavit that are in contradiction to what has been stated
in the
founding affidavit, or not specifically dealt with, and repeats that
Selective had not overcome the challenges. The statement
referred to
accordingly was placed in dispute.
[23]
Furthermore,
as regards any criticism that the certificate was not responded to
separately, a party to litigation is not required
to trawl through
annexures to an affidavit to identify what might or might not
possibly be relevant and relied upon. It was incumbent
on Selective
to have specifically raised its alleged compliance, for example, by
having submitted all annual financial statements,
in the text of its
answering affidavit.[29]
Selective failed to do so.
[24]
An annual return in terms of s 33 is something different to the
requirement of annual financial statements. What might
be meant by
the ‘annual return’ and that it had allegedly been
complied with, and if so, what impact that would have,
was not raised
with the Commission’s counsel and the Commission accordingly
never had the opportunity to respond thereto
during argument.
[25]
The same applies to the alleged certification by the company
secretary, except that in addition, the alleged certification
constitutes inadmissible hearsay evidence as it is relied upon for
the truth of the contents thereof, although no confirmatory
affidavit
was filed from the company secretary. Similarly with regard to the
share register. It is, incorrect that the ‘Commission
chose not
to deal with these facts in the replying affidavit’. It denied
the allegations in the answering affidavit insofar
as they were in
contradiction to the founding affidavit. There is no other way to
dispute that the share register is properly updated,
than to deny it.
Significantly again, Selective never applied for compliance
certificates to be issued if it was of the view that
it had complied.
[26]
Selective accordingly did not even begin to comply with the
obligations, which it had been called upon repeatedly to
comply with.
Further, separate and distinct from any compliance issues, it failed
to show that it was not trading recklessly or
fraudulently and that
its assets properly valued exceeded its liabilities.
[27]
As the conditions stipulated were not complied with and as the
various instances of non-compliance were not attended
to
satisfactorily, the Commission brought an application (the
delinquency application) to have some of the directors of Selective
declared delinquent directors. This application is apparently still
pending. The Commission also launched the liquidation application,
which is the subject of this appeal.
[28]
In summary, Selective’s answer to the various allegations of
non-compliance, include, inter alia, the following:
(a) It admitted
that it and some of its directors failed on numerous occasions to
timeously comply with various statutory
duties;
(b) It admitted
that annual financial statements were not prepared as required;
(c)
It raised,
by way of explanation, that a new board appointed in August 2017,
consisting of four members and Mr Moses Maja (Mr Maja),
the deponent
to the answering affidavit who continued as a director and, it seems,
is its sole executive director:[30]
was seeking to undo the damage resulting from self-confessed poor
management and litigation; had prepared and published ‘various
annual reports’ (but only one for the year ended 30 June
2017/2018 was attached); had subsequently complied with its tax
obligations, annexing what purports to be a tax compliance status
certificate; and that it had entered into an agreement with Singular
Systems (Pty) Ltd (Singular) to ‘clean up’ the share
register and provide certain services, including maintaining the
register and providing a trading platform;
(d) It denied that it was
at any time unable to pay its debts as they became due and payable in
the normal course of business; and
that it was trading whilst not
able to pay its debts, but without having reviewed any notices or
obtaining a compliance certificate
to that effect and without
producing proof thereof;
(e) The annual financial
statements for the year ended 30 June 2018, which were the only full
annual financial statements annexed,
were already late.
[29]
Selective’s approach in answering the pertinent allegations of
non-compliance made against it was one of vagueness,
lacking in
detail, failing to provide proof of proper compliance, and was thus
unacceptable. The directors were in serial default
of their duties,
variously by reason of indifference, ignorance or careless disregard.
They failed in their duty to Selective to
comply properly and
timeously, and in no small measure, at all, with the provisions of
the Act, and their legal and fiduciary duties
and responsibilities.
It is not the function nor responsibility of the Commission to advise
on the ‘day to day running’
of Selective. The Commission
is the regulator and must maintain a professional distance from all
the companies it regulates. It
would be a matter of impossibility and
likely overreach for the Commission to help and advise on the day to
day running of all
companies and close corporations registered with
it. The failure on the part of Selective, represented by Mr Maja, to
recognise
and accept Selective’s most basic general corporate
governance responsibility is damning and disturbing. And very little
has changed in Selective after all these notices. Mr Maja is still
the sole executive director, even of the ‘new board’.
[30]
Save for a
few specific responses, some being pregnant denials of non-compliance
but unsupported by documentary proof of compliance,
the
remaining allegations of non-compliance were simply met with an
omnibus response that where a factual allegation had been made
in the
founding affidavit and it conflicts with what is set out in the
answering affidavit, it should simply be considered to be
denied.
Selective did not enjoy the luxury of such an answer. When the facts
averred in an opposed application are such that the
respondent must
necessarily possesses knowledge of them it must provide proof of
compliance. Instead of providing a substantiated
answer, Selective
rests its defence on a bare or ambiguous denial, in which
circumstances a court is entitled to adopt a robust
view of the
matter[31] and infer that
there was no proper compliance.
[31]
Specifically, Selective denied a contravention of s 30 (annual
financial statements), s 24(4)(a) (failure to maintain a
securities register or its equivalent as required in terms of s 50),
failure to raise any capital for
prospectuses registered on 23
January 2012, 16 July 2012, 16 October 2012, 16 January 2013, 25
April 2013 and 18 November 2013,
and denied the non-negotiability of
securities held. Selective had a positive duty, if it denied
non-compliance, to provide proof
of proper compliance by annexing
copies of these documents, or at least formally tendering copies
thereof in terms of rule 35(12).
It failed to do so.
[32]
It relied, in its answer, on a Report of an Independent External
Auditor. The contents of this report are not confirmed
under oath.
That notwithstanding, the report, which is dated 24 July 2019,
records results for the interim period ended on 31 December
2018. The
interim results were also late in being issued only on 24 July 2019.
The breaches of provisions of the Act continue.
The new board too,
has failed to ensure full and proper compliance with the provisions
of the Act, notwithstanding a reasonable
period having elapsed since
its appointment.
[33]
If Selective was not guilty of this egregious disregard of virtually
everything required of it and if it was to properly
conduct itself as
a public company, then it should have obtained the necessary
compliance certificates. It failed to do so. The
overall picture that
emerges on the totality of the evidence is that Selective blunders
along recklessly, without timeous and proper
financial statements,
openly in default of many of its obligations in law, without a proper
shareholders’ register and certainty
as to who its investors
are. The only reasonable inference must be that it is unable to do so
despite repeated demands, to demonstrate
that its assets exceed its
liabilities and that it is not trading recklessly.
[34]
And the persons who stand to suffer, are the disadvantaged
individuals it has recruited as shareholders with the promise
of
investment growth. These are persons who would otherwise not be able
to afford to invest on the JSE and who are likely unable
to hold
their ‘board’ to account, that is even if properly
convened annual general meetings were convened. The negative
impact
on their rights, speaks for itself.
The
liquidation of companies
[35]
The
winding-up of companies is regulated by the provisions of the Act.
The 1973 Act did not draw a distinction between the winding-up
of
insolvent and solvent companies. The Act, however, draws that
distinction, but it does not define what is meant by solvency
or
insolvency. This Court, in Boschpoort
Ondernemings (Pty) Ltd v Absa Bank Ltd,[32]
recognised
the forms of insolvency as factual insolvency (where a company’s
liabilities exceed its assets) and commercial
insolvency (a position
in which a company is in such a state of illiquidity that it is
unable to pay its debts, even though its
assets may exceed its
liabilities). The test is not as stated in the second judgment
whether the company in winding-up, that is
after liquidation of all
its assets, can pay its debts. It is sufficient if it cannot pay its
debts as they fall due without first
liquidating fixed assets and
investments, that is, that it is commercially insolvent. The net
asset value of R145 056 597
(of Selective) is not the sole
determinant of whether the company is insolvent.
[36]
Nor is the statement of the audit committee that Selective ‘complies
in all respects with the requirements of the
Act’ of
assistance. This is a conclusion of unidentified persons, not under
oath, and thus inadmissible hearsay, and which,
in any event, was
denied in reply. Section 345 is furthermore not, with respect, ‘a
safeguard to avoid liquidating a company
without evidence to prove .
. . that it may be insolvent’. Section 345 assists as pointed
out in the second judgment in establishing
commercial insolvency when
a creditor seeks the winding-up of a company. But a company may also
be wound up by a variety of other
persons, other than creditors, for
whom s 345 would hold no benefit. Ultimately, the issue is whether on
a conspectus of all the
evidence the company is, or, in casu, may be
commercially insolvent. Every case must be decided on its own facts.
[37]
Nothing is achieved by drawing comparisons with the actual financial
position of companies in other cases as the second
judgment seeks to
do with reference to Boschpoort. Although, at the time of the
filing of the answering affidavit, annual financial statements beyond
the 2018 financial year should
have been available and annexed,
Selective chose to annex only the 2018 statements for reasons which
remain unexplained, but at
the level of inference probably was
because these were the only ones available. And these statements
demonstrate that it is commercially
insolvent, as I shall explain
below.
[38]
The
distinction between solvent and insolvent companies is not the only
new aspect of the Act. A company could in the past always
also be
wound-up on the grounds that it would be just and equitable to do so,
whether it was solvent or insolvent. The 1973 Act
also provided that
the Trade Minister, who had Ministerial oversight functions, could
apply for the winding-up of any company.
This power of the Minister
was removed by the Act and, it can be safely accepted, was given to
the Commission[33]
which remains responsible to exercise the oversight function.
[39]
The responsibilities of the Minister have under the Act been
transferred to the Commission. There is no reason why these
powers
should be restricted, in the case of winding-up of a company, and at
the instance of the Commission, to only the instances
in s 81(2)(f).
[40]
The present position in respect of insolvent companies is the same as
it was under the 1973 Act. As has been held:
‘It has also long
been a construction of interpretation of statutes that, in the
absence of express wording to the contrary, the
legislature did not
intend to alter the law as it had previously stood . . ..’[34]
The
context and purpose of the Act are even more supportive of the
aforesaid construction.
The
winding-up of solvent companies
[41]
Section 79(1) and (2) provide that:
‘(1)
A solvent company may be dissolved by –
(a) voluntary
winding-up initiated by the company as contemplated in section 80,
and conducted either-
(ii) by
the company’s creditors, as determined by the resolution of the
company; or
(b) winding-up
and liquidation by court order, as contemplated in section 81.
(2)
The procedures for winding-up and liquidation of a solvent company,
whether voluntary or
by court order, are governed by this Part[35]
and, to the extent applicable, by the laws referred to or
contemplated in item 9 of Schedule 5.’[36]
[42]
As regards the winding-up of a solvent company by a court order, s 81
specifies the grounds on which the company itself;
a business rescue
practitioner; one or more of the company’s creditors; the
company, directors or shareholders; a shareholder
with the leave of
the court; and the Commission or the Takeover Regulation Panel may
apply for a winding-up order. Section 81(1)(f) provides that:
‘(1) A court may
order a solvent company to be wound up if –
. . .
(f)
the Commission or Panel has applied to the court for an order to
wind up the company on the grounds that –
(i) the
company, its directors or prescribed officers or other persons in
control of the company are acting or
have acted in a manner that is
fraudulent or otherwise illegal, the Commission or Panel, as the case
may be, has issued a compliance
notice in respect of that conduct,
and the company has failed to comply with that compliance notice; and
(ii) within
the previous five years, enforcement procedures in terms of this Act
or the Close Corporations Act,
1984 (Act 69 of 1984), were taken
against the company, its directors or prescribed officers, or other
persons in control of the
company for substantially the same conduct,
resulting in an administrative fine, or conviction for an offence; .
. .’
The
winding-up of insolvent companies
[43]
Item 9 of schedule 5 to the Act provides for the continued
application of provisions of the 1973 Act in respect of the
liquidation of insolvent companies. It provides:
‘(1) Despite the
repeal of the previous Act, until the date determined in terms of
sub-item (4), Chapter 14 of that Act continues
to apply with respect
to the winding-up and liquidation of companies under this Act, as if
that Act had not been repealed subject
to sub-items (2) and (3).
(2) Despite sub-item (1),
sections 343, 344, 346, and 348 to 353 do not apply to the winding-up
of a solvent company, except to
the extent necessary to give full
effect to the provisions of Part G of Chapter 2.
(3) If there is a
conflict between a provision of the previous Act that continues to
apply in terms of sub-item (1), and a provision
of Part G of Chapter
2 of this Act with respect to a solvent company, the provisions of
this Act prevail.
(4) The Minister, by
notice in the Gazette, may –
(a) determine a
date on which this item ceases to have effect, but no such notice may
be given until the Minister is satisfied that
alternative legislation
has been brought into force adequately providing for the winding-up
and liquidation of insolvent companies;
and
(b) prescribe
ancillary rules as may be necessary to provide for the efficient
transition from the provisions of the repealed Act to
the provisions
of the alternative legislation contemplated in paragraph (a).’
[44]
Section 344 of the 1973 Act, which continues to apply, provides:
‘A company may be
wound up by the Court if –
(a) the
company has by special resolution resolved that it be wound up by the
Court;
(b) the
company commenced business before the Registrar certified that it was
entitled to commence business;
(c) the
company has not commenced its business within a year from its
incorporation, or has suspended its business
for a whole year;
(d) in
the case of a public company, the number of members has been reduced
below seven;
(e) seventy-five
per cent of the issued share capital of the company has been lost or
has become useless for the business
of the company;
(f) the
company is unable to pay its debts as described in section 345;
(g) in
the case of an external company, that company is dissolved in the
country in which it has been incorporated,
or has ceased to carry on
business or is carrying on business only for the purpose of
winding-up its affairs;
(h) it
appears to the Court that it is just and equitable that the company
should be wound up.’
(Emphasis added)
[45]
As to what
might be ‘just and equitable’, the jurisprudence is well
established and will include: ‘the disappearance
of the
company’s substratum’; ‘illegality of the objects
of the company and fraud committed in connection therewith’;
a
‘deadlock which results in the management of the company’s
affairs’; ‘grounds analogous to those for
the dissolution
of a partnership’; and ‘[where there has been]
oppression’.[37] This
list is not exhaustive. The grounds are furthermore not confined to
instances which are analogous to those in other parts
of the section.
No general rule can be laid down as to the nature of the
circumstances that have to be considered to ascertain
whether a case
comes within the phrase.[38]
[46]
Although
‘just and equitable’ is not a catch all ground for
winding-up a company,[39] our
courts are empowered to exercise their own discretion, to prevent the
continuation of a company if it would be detrimental
to its
shareholders or the public interest, on the basis that it is just and
equitable that it be wound up.
[47]
Section
79(3) makes it clear that the just and equitable criterion is to be
applied also to companies which are insolvent or may
be insolvent. It
has been held in the past that s 344(h)
postulates not facts, but only a broad conclusion of law, ‘justice
and equity as a ground for winding-up’.[40]
This principle, undoubtedly, also holds true in the determination of
what may constitute just and equitable grounds for the purpose
of s
79(3).
[48]
What is just and equitable is furthermore constantly undergoing
development as new instances of liquidating a company
on that ground
develop, are recognised and are accepted. This flexibility is
necessary to cater for changing business circumstances.
It is also
consistent with the provisions of s 158 of the Act. Section 158
provides:
‘When determining a
matter brought before it in terms of this Act, or making an order
contemplated in this Act –
(a)
a court must develop the common law as necessary to improve the
realisation and enjoyment of
rights established by this Act; and
(b)
the Commission, the Panel, the Companies Tribunal or a court –
(i)
must promote the spirit, purpose and objects of this Act; and
(ii)
if any provision of this Act, or other document in terms of this Act,
read in its context,
can be reasonably construed to have more than
one meaning, must prefer the meaning that best promotes the spirit
and purpose of
this Act, and will best improve the realisation and
enjoyment of rights.’
Provisional
winding-up orders
[49]
Ordinarily,
following an application for the liquidation of a company and the
exchange of affidavits, the usual procedure[41]
is to grant a provisional order of winding-up and a rule nisi calling
on all interested persons to show cause why a final winding-up order
should not be granted. This procedure is not
laid down in the Act or
any of its predecessors. It is, however, in our law, a
well-established practice.[42]
Granting an outright final winding-up order might be suggested in
some practice manuals or directives of divisions of our high
court,
but usually only where there are good reasons to do so. However, the
grant, firstly, of a provisional winding-up order should
be
ordinarily preferred, where this is appropriate and required in the
interests of justice.
[50]
That is because there is much to commend first granting a provisional
winding-up order. It allows an opportunity for
a respondent company
to oppose the final winding-up order on the return day, when the test
is different to that which applies at
the provisional stage. It also
affords interested third parties with notice of the provisional
winding-up order, thereby allowing
them to participate in the
proceedings. By proceeding directly to the grant of a final order,
without first granting a provisional
order, interested parties are
denied the opportunity to be heard. They are then presented with a
final order, as a fait accompli.
[51]
The process of a provisional order, where appropriate, preceding the
adjudication of a final winding-up order, is therefore
a salutary
practice. This is particularly so in the case of the winding-up of a
public company, with its exposure to the general
public and its
shareholders often running into many thousands of persons. It is all
the more so where the company’s share
register is incomplete or
otherwise inadequate, as is the case with Selective. Third parties
who are in the possession of facts
material to the winding-up will
become aware of the provisional winding-up order and can then place
their views, whether in favour
or against the liquidation before the
court. The court should then be better informed when it has to decide
whether a final order
should be granted. That did not happen in this
instance.
In
the high court
[52]
The factual
basis on which the high court was required to make its findings, and
the evidentiary matrix on which this appeal is
to be decided, are the
facts alleged in the affidavits. Those were the facts known to the
high court when adjudicating the winding-up
application.[43]
[53]
The high court found that the grounds in s 81(1)(f) were not
satisfied. The correctness of that finding has rightly not been
disputed, and it has not featured further. Any reliance
on the
provisions of s 81(1) for the winding-up of Selective as a solvent
company would, in any event, not have been competent
if it were in
fact insolvent.
[54]
Section 81(1)(f) was not the only basis on which the
Commission brought its application. It relied, in the alternative, on
the ground that it would
be just and equitable that Selective should
be wound-up.
[55]
The high
court concluded that Selective was insolvent. Selective had only
placed its 2018 annual financial statements before the
high
court.[44] The high court
found that Selective had made a past operating loss of more than R11
million. It uses capital raised through the
sale of its shares to
purchase shares listed on the JSE, dealing with the investments of
its shareholders and making a loss of
this nature. The high court
correctly viewed this as of necessity meaning that its liabilities
exceed its assets, its assets being
the shares in other companies.
Apart from day-to-day expenses such as rent and salaries, the
liability to its shareholders remains.
[56]
The high
court however continued by saying that insofar as ‘s 344(h)
does not only apply to insolvent companies, [the court] need not rely
on this finding’ of insolvency only. Presumably what
the high
court had in mind were the provisions of s 79(2) that ‘[the]
procedures for winding-up and liquidation of a solvent
company’
are governed by Part G[45] to
the extent applicable,
by the laws referred to or contemplated in item 9 of Schedule 5. Item
9(2) also provides that despite s 344 and other provisions
not
applying to the winding-up of a solvent company, it does apply, ‘to
the extent necessary to give full effect to the provisions
of Part G
of Chapter 2’.[46]
[57]
The high
court concluded that: it being common cause that Selective acted
illegally and did not comply with the compliance notices
issued to it
or complied only in certain respects; or complied only much later and
long after having undertaken to do so; its directors,
realising that
it is insolvent and the value of its shares ever diminishing, still
did not put a motion for voluntary liquidation
to the vote before an
annual general meeting of shareholders, that it would be just and
equitable for a winding-up order to be
granted. In this respect the
high court invoked the provisions of s 158.[47]
[58]
The second
judgment concludes that the processes in s 346[48]of
the 1973 Act were not adhered to. It seems that the complaint relates
specifically to the requirements of s 346(3) and possibly
s 346(4).
It is highly unlikely that the high court order would have been
granted absent compliance with these provisions of s
346.
Non-compliance was however never raised as a ground of appeal, nor
during argument. It cannot now be found as a proven fact,
and for a
conclusion that adequate notice was not given. It is simply unknown
when these requirements might have been complied
with. But, in any
event, no minimum ‘notice’ period is prescribed. Section
346 of the 1973 Act simply provides that
the certificate from the
Master must not have been issued more than 10 days before the
application is moved. In practice the security
is often provided and
the certificate obtained on the day the application is heard. The
certificate, and the Master’s report,
are then handed up by
counsel in court when moving for the order of provisional winding-up.
[59]
The high court concluded that as a result of the matter ‘having
been argued fully’, there was no need to
grant a provisional
order. It granted a final order.
Was
Selective taken by surprise?
[60]
Whether
Selective was taken by surprise regarding the issue whether it is
insolvent or may be insolvent requires an examination
of the case
which it had to meet, as set out in the Commission’s founding
affidavit. It is trite law that although specific
statutory
provisions relied upon in support of a cause of action are often
alleged with reference to number and in terms in affidavits,
this is
not an invariable rule. It is sufficient if a respondent is appraised
of the basis of the claim against it in the context
of the applicable
law, to enable it to respond meaningfully thereto.[49]
This requirement was met on the facts of this appeal.
[61] The
Commission sought Selective’s winding-up, in the alternative,
to its application based on s 8(1)(f), on the basis that it
would be just and equitable to do so. Selective correctly recognises
that this would require a finding as
to its solvency. Section 79(3),
in express terms, requires that a determination be made as to whether
the company is insolvent
or may be insolvent. That contemplates, or
at least permits of a determination coming about in the course of
proceedings and after
the exchange of affidavits, even if not
specifically pleaded. Not surprising, Selective on its own admission
was alive to the fact
that its solvency was in issue.
[62]
It would be contrary to the text and purpose of s 79(3) to adopt an
interpretation of the provisions of the Act which
would permit an
application for the winding-up of a solvent company, based on one of
the grounds in s 81, to be defeated by the
company establishing that
it is insolvent, thereby escaping its winding-up notwithstanding its
insolvency, unless and until a separate
substantive application based
on its insolvency is brought. It would result in a multiplicity of
proceedings, and the possibility
of conflicting judgments on a
company’s solvency.
[63]
The provisions of s 79(3), perhaps inelegantly but nevertheless
plainly, exclude that possibility. They preserve the
provisions of
the 1973 Act, including s 344(h) for the winding-up of a
company, inter alia, on the grounds that it would be just and
equitable to do so, on the application by any interested party, when
in an application
for the winding-up of a company alleged to be
solvent, it turns out to be insolvent.
[64]
The grounds
for winding-up in the 1973 Act are, in terms of s 79(3), available
not only where it is determined that a company is
insolvent, which
would include de
facto
and commercial insolvency,[50]
but also where a court determines that it ‘may be insolvent’.
If determined that it ‘may be insolvent’,
then, provided
the other requirements of s 79(3) are satisfied, namely that there is
an application by an ‘interested party’,
the court
hearing the application in terms of s 81 may proceed and wind-up the
company if, it is, just and equitable to do so.
That is what happened
in this case.
[65]
The founding affidavit provided that the winding-up of Selective was
sought on the basis of s 81(1)(f), and alternatively to s
81(1)(f), on the basis that it would be just and equitable to
do so. Although terse, the founding affidavit also included specific
allegations
under a separate heading of ‘Just and Equitable’:
that Selective was carrying on its business recklessly thus evincing
a lack of any genuine concern for the prosperity of Selective; that a
director, Mr Maja, himself was of the opinion that Selective
required
the assistance of regulatory bodies, such as the Commission, to
ensure that shareholders and their monies were protected;
that
Selective be placed under curatorship, if deemed necessary under the
circumstances; and that the directors, or at least Mr
Maja, had
questioned the viability of Selective, expressing the concern that it
is doubtful and highly unlikely that Selective
could achieve its
raison d’etre.
[66] The
founding affidavit did not specifically allege that Selective was
insolvent. That is not surprising.[51]
It could hardly be expected of the deponent to the Commission’s
founding affidavit to have alleged as a fact under oath,
that
Selective was insolvent. Selective had failed to provide its annual
financial statements for many years.
[67]
The annual financial statement for the year ended 30 June 2018 found
its way into the proceedings before the high court
as an annexure to
the answering affidavit. The deponent to the founding affidavit,
paying due regard to the fact that the Commission
is not in the
position of a creditor or shareholder of Selective with knowledge of
its liabilities, could not independently positively
swear under oath
that Selective was insolvent.
[68]
Selective would not have been taken by surprise. Indeed, it annexed
its annual financial statements for the year ended
30 June 2018 to
its answering affidavit, no doubt in an attempt to show that it was
compliant. Unfortunately, the 2019 financials
were by then already
overdue, which demonstrates that Selective was still non-compliant.
[69]
But the 2018 financials, being presumably the most up to date
financials available at the time of deposing to the answering
affidavit, did contain factual information as to Selective’s
insolvency. That would inevitably have to be assessed for a
court to
determine whether s 79(3) would find application. To the extent that
Selective might at the time have under-estimated
the importance of
the issue of its insolvency, it only had itself to blame. But it will
not have been irreparably prejudiced in
the light of the order that I
propose granting below.
[70]
The requirements to be considered in determining whether Selective
should have been placed under a winding-up order are
whether there
was an application for the winding-up of Selective by any interested
person and whether Selective was or may be insolvent.
For convenience
I shall deal first with whether the Commission was ‘an
interested person’ as contemplated by s 79(3),
then whether the
high court faced an ‘application’, and then whether
Selective ‘is or may be insolvent.’
The
Commission as an ‘interested person’
[71]
Section
79(3) requires that where it is determined that a company is or may
be insolvent, it can be wound up on the application
of an interested
person. The phrase ‘interested person’ is not defined.
The provision must be seen in its historical
legislative context.
Doing so and having regard to the objectives of the Commission stated
in s 186, the irresistible conclusion
is that the Commission would
qualify as an interested person.[52]
[72]
It is
incorrect to conclude, as the second judgment does, that an
application for the winding-up of a company which might have been
believed to be solvent, for the purposes of s 81, but when determined
that it is or may be insolvent as contemplated in s 79(3),
can then
only be wound up on the application of those categories of persons in
s 81 in respect of whom the legislature in s 81
expressly provided
where ‘it is otherwise just and equitable for the company to be
wound-up.’ Such a provision appears
only in: s 81(1)(c)
in a winding-up by one or more creditors, and s 81(1)(d)
in a winding-up by the company, one or more directors, or one or more
shareholders on the ground stated therein.[53]
That is not surprising. The legislature wanted to provide, in respect
of those persons, that a court would have the power to wind-up
a
company on the grounds of it being just and equitable to do so, even
if solvent. But it does not affect the position of insolvent
companies.
[73]
The position is altogether different if during the course of any
proceedings in terms of s 81, that is at the instance
of any of the
persons listed in s 81(1)(a) through to (f) it is
determined that the company ‘is or may be insolvent’. It
may then be wound-up on the grounds stated in s 79(3)
which include
undisputedly, the ground of it being just and equitable’, on
the application of an ‘interested person’.
If the
intention of the legislature was to confine such an application to
the sub-categories of persons listed in the sub-paragraphs
of s 81
where express reference is made to ‘it is otherwise just and
equitable for the company to be wound-up’, then
it would have
said so, and referred to the persons in s 81(1)(c), and (d)
rather than an ‘interested person’. It did not do
so, but deliberately chose instead, to confer this right to
apply for
the winding-up, on any ‘interested person’.
[74]
These
sections all appear in the same chapter of the Act. The legislature
must be taken to have in mind the existing law when it
passes new
legislation and frames new legislation with reference to the existing
law.[54] There is furthermore
also no reason to interpret the meaning of ‘interested person’
with reference to what is meant
by ‘interest’ in the
context of deciding on the joinder of parties to litigation. Joinder
might require ‘a direct
and substantial interest’ but in
s 79(3) the words ‘interested person’ are used in an
unqualified way, for an
altogether different purpose, in an
altogether different context and in the widest sense.
[75]
Selective has failed to comply with various statutory requirements.
It is the function of the Commission to ensure proper
compliance with
these requirements. Not only has Selective failed to comply with
these requirements, but it is also commercially,
if not actually,
insolvent. It is difficult to contemplate a party having a more real
interest than the Commission, as regulator
with broad supervisory
powers, to seek the winding-up of a company that is insolvent.
[76]
This conclusion is also consistent with s 157 which provides for
‘extending standing to apply for remedies’.
It provides:
‘(1) When, in terms
of this Act, an application can be made to, or a matter can be
brought before a court . . . the right to make
the application or
bring the matter may be exercised by a person–
(a)
Directly
contemplated[55]
in the particular provision of this Act;
(b)
. . .’ (Emphasis added)
Standing
has also received a wider interpretation in our constitutional
dispensation.[56]
[77]
There is no reason why the ‘interested person’
contemplated in s 79(3) should not include an applicant in
an
application under s 81. The Commission, as the official regulator, is
a person who would have a very real interest in the winding-up
of
Selective. Selective had failed to respond to notices from the
Commission to show that it was not trading in insolvent
circumstances,
its administration reveals a dismal failure to comply
with basic statutory requirements, and notwithstanding undertakings
to correct
this position also by the intervention of a newly
constituted board, it had not done so. The Commission had standing to
apply for
the winding-up of Selective on the alternative basis of it
being just and equitable, as it is an interested party.
The
requirement of ‘an application’
[78]
Accepting that the Commission would qualify as an interested party,
Selective disputed that there was an application
for it to be wound
up as an insolvent company. Selective contended, somewhat weakly,
that a separate substantive application setting
out the basis upon
which the winding-up would be sought, for example that it was just
and equitable to do so, of which Selective
would have to be given
notice, was required.
[79]
There is no
reason that the application should emanate from a third party, and
why it could not also emanate from the Commission.
Any other
interpretation would be absurd.[57]
It would also fly in the face of the purpose underlying s 79(3),
namely to provide a court with the power to liquidate Selective
at
the instance of the Commission, as an applicant in an application in
terms of s 81, if the court determines that Selective may
be
insolvent.
[80]
There is no need for a separate substantive application. Selective
had been given notice in the application by the Commission
that its
winding-up would be sought, in the alternative, on the grounds of it
being just and equitable to do so, which is the basis
for liquidation
contemplated in s 79(3). There is absolutely no reason, in principle,
why this could not be done in the same application.
Section 79(3)
does not require a separate substantive application. The requirement
of an application was accordingly satisfied.
Should
a final winding-up order have been granted?
[81]
Whether a company should be wound up on the ground of it being just
and equitable to do so, is a wide enquiry that requires
to be
assessed holistically. This is all the more so in the case of a
public company.
[82]
The high court concluded that ‘as a result of the matter having
been argued fully’, there was ‘no need
to grant a
provisional order’. Potentially interested parties, including
shareholders and creditors were therefore denied
the benefits of the
two-stage procedure where a provisional order is first granted. In
acting thus, the high court, on the specific
facts of this case,
erred. The issues in this case concerned a public company and the
interests of many shareholders, in circumstances
where considerable
doubt exists as to the reliability and integrity of its shareholders’
register.
[83]
I am therefore disposed to setting aside the final winding-up order.
The Commission contended that if this Court was
disposed to setting
aside the final winding-up order, it should substitute the order of
the high court with a provisional winding-up
order. It is through the
prism of the test which is to be applied at the grant of a
provisional order that I then consider what
relief, if any, the
Commission had established it was entitled to.
Should
Selective have been wound up provisionally by the high court as
insolvent?
[84]
The test whether a provisional order should be granted is different
to that when a final order is sought. The grant of
a provisional
order has the result, inter alia, of securing the assets of
the company in the interest of creditors and shareholders without
delay and to avoid a possible dissipation
of assets. Provisional
orders are generally granted on the affidavits. Disputes of fact,
unless inconsistent with the probabilities,
are generally not
referred to oral evidence at the provisional stage.
[85]
An
applicant for a provisional winding-up order needs to establish
a prima
facie case.[58]
As to what is meant by a prima
facie case
at the stage of a provisional order in an opposed sequestration,[59]
has been accepted as also definitive of the approach in provisional
winding-up applications, Trollip J in the Provincial
Building Society[60]
said that:
‘My reasons for
expressing that view are that, firstly, the whole procedure at this
initial stage is designed to afford the creditor
a simple and speedy
remedy for preserving the debtor’s estate and enforcing his claim; .
. . and if the facility of viva
voce evidence
was generally to be accorded to the debtor at this stage, it might
well prolong the proceedings unduly and thus stultify
the whole
object of the procedure. Secondly, the Act contemplates . . . that at
this stage the matter should ordinarily be disposed
of on the
petition and affidavits (cf too Daitsch
and Another v Osrin and Another, 1950
(2) SA 343 (C)
at p 346). Thirdly, generally the hearing of oral evidence at an
interlocutory or interim stage of any proceedings is
inappropriate
because it might involve giving findings on credibility and otherwise
prejudging issues which properly belong to
the Court of final
instance (Zondo v Union
& National & General Assurance Co of SA Ltd, 1954
(3) SA 541 (W)).
I am not unmindful in
arriving at the above conclusions that the granting of a provisional
order can have serious consequences to
the debtor, but that
consideration is offset by the fact that the Court must first be
satisfied that a prima facie case has been made out;
that even then it has a discretion to grant or refuse an order: and
that in any event in exceptional
circumstances it can hear viva
voce evidence on any relevant aspect of the matter.’
[86]
There are
differences between the liquidation of a company and the
sequestration of a debtor’s estate: a winding-up may be
obtained on grounds other than the insolvency of the company; and the
1973 Act and the Act do not contain wording similar to s
10 of
the Insolvency
Act 24 of 1936,
which requires merely a prima
facie
case when a provisional order is sought. However, similar approaches
are adopted when provisional orders are sought. A court always
has
the inherent power to order its own procedures,[61]
having regard generally, to the fair and expeditious administration
of justice.
[87]
In Kalil
v Decotex,[62]
this Court indicated that in applications for a provisional order of
winding-up, the term ‘prima
facie case’
should continue to be used, as it has been used for some years in
this context, provided that it is understood
as denoting a balance of
probabilities on all the affidavits. If on the affidavits there is
a prima
facie
case in favour of the applicant seeking the provisional winding-up,
then a provisional order of winding-up should normally be granted.
There is no lasting injustice to the respondent, if there is one at
all because, on the return day, it will be given the opportunity
to
dispute, and in a proper case even to present oral evidence on
disputed issues.[63]
[88]
Section
79(3) requires that it had to be determined whether Selective was
insolvent or that it ‘may be insolvent’. These words must
be accorded their ordinary meaning in the context of the Act and
having regard to its purpose.[64]
The question to be answered is whether on the relevant material
facts, the probabilities, on a preponderance, favoured the conclusion
that Selective was or may be insolvent and should be wound up
provisionally.
[89]
The factual
basis on which the winding-up application fell to be decided was on
the allegations contained in the founding affidavit
and the answering
affidavit.[65] At a minimum,
commercial insolvency was required to be established. Commercial
insolvency enquires into whether a company’s
liquid asset is
available to meet ongoing and expected obligations in the immediate
future.[66]
[90]
The
question whether the Commission had established its case clearly
favoured to be answered in favour of the Commission: Selective
had
suffered a significant financial loss; it had committed and was still
committing various irregularities which had been reported
by
regulatory bodies, which the Commission had found to exist[67]
and which, notwithstanding demand, had not been remedied; it is a
public company soliciting investments from the public but its
securities register remained deficient; it had failed for several
years to obtain subscriptions to new shares and did not receive
investments after publishing prospectuses; according to the annual
financial statements for the period ending 30 June 2018 Selective
was, if not de
facto
insolvent, then at least commercially insolvent; it was cash
strapped, lacked liquidity and had to sell assets to pay ongoing
expenses. It was selling down its equity holdings to pay creditors,
lost significant capital over the years, failed to produce annual
financial statements for many years, had a negative cash flow and
conducted itself in a manner in serial default of what the Act
requires, thereby giving rise to the conclusion that it may be
insolvent. This, having regard to the test which applies at the
stage
of the grant of a provisional order, was sufficient to trigger the
application of the provisions of item 9 of Schedule 5
of the Act, as
contemplated in s 79(3).
[91]
The jurisdictional facts in s 79(3) were satisfied. Section 79(3) was
not created because the legislature sought to provide,
as the second
judgment suggests, for the ‘instances where a Commission or
shareholder brings an application for the winding-up
of a solvent
company in terms of ss 8(1)(f) and whilst that application is
pending, a creditor who has established that the company is unable to
pay its debts (for having
failed to meet the s 345 demand) brings an
application based on the insolvent status of the company. The
separate second application
brought by a creditor in those
circumstances will be an application in its own right, to be pursued
and dealt with separately by
the applicant creditor, as dominus
litis in that application. Indeed, there would be no need for a s
79(3), or any provision like it in that situation.
[92]
Section 79(3) specifically finds application where an application had
relied on the company being solvent. In this instance
the Commission
did not ‘change it stance’ and it has certainly not
conflated the grounds for winding-up. It is also
not a case of
affording the Commission a ‘second bite at the cherry by
changing the grounds for winding-up from solvent to
insolvent without
much effort’. It is the very effect of the ordinary plain
meaning of the words employed by the legislature
in s 79(3). That is
the purpose of s 79(3). That is the context in which its clear
meaning must be given effect to.
[93]
As to whether it was just and equitable that Selective be wound up
provisionally, it was at least commercially insolvent,
or it appeared
(that is all that is required) that it may be commercially insolvent;
it had failed to comply with some of the most
basic statutory
formalities; it supposedly sought to improve the financial position
of persons who most require or would benefit
from economic
empowerment, yet it jettisons its most basic accountability
responsibilities; despite being required to show cause
that it was
not trading under insolvent circumstances or recklessly, it not only
failed to do so, but deliberately elected not
to do so, contrary to
the spirit, purpose and object of the Act, and in what can only be
inferred to be an attempt to defeat the
realisation and enjoyment of
rights and the scheme in the Act. It is in the interests of justice
that the hand of the law be laid
upon the estate of Selective and
that its assets be preserved to ensure an orderly treatment of all
its creditors and all its shareholders
whether recorded in its share
register, or not. Selective has not demonstrated in what respects,
having regard to its finances,
it was solvent or, at least,
commercially solvent.
[94]
The only inference to be drawn from Selective’s serial
non-compliances with the provisions of the Act, is that
it was
trading recklessly and under insolvent circumstances. There can be no
doubt that these considerations require that Selective
should be
liquidated to preserve some of the funds for its existing investors,
whoever they all may be. Those are compelling just
and equitable
reasons for Selective’s winding-up. Shareholders and their
investments must be protected.
Conclusion
[95]
The Commission had established that it was entitled to a provisional
winding-up order in the proceedings before the high
court. It is in
the interests of justice that the order of the high court be
substituted with a provisional winding-up order, with
the usual
attendant directions providing for publication of the order to
interested parties, calling upon them to show cause why
a final order
should, or should not, be granted.
[96]
Public notification is very important. The physical residential
locations of Selective’s shareholders, as a target
audience,
remain largely uncertain. All we have been told is that Selective’s
shareholders, numbering approximately 26 000,
are black and
previously disadvantaged investors across all living standard measure
groups. An appropriate form of publication
will be in the Sowetan
newspaper circulating in the greater Johannesburg area, to cover the
most densely populated area near Selective’s
place of business,
and City Press, as a national newspaper, to cover the rest of the
country. This is provided for in the order
below.
[97]
What impact the order may have on the administration of the estate of
Selective, the status of the liquidators who have
been appointed, and
what powers they have, is left to the Master, the liquidators, and
any court orders that might be sought hereafter.
Costs
[98]
Although the appeal succeeds partly, it does not result in an order
as sought by Selective. Selective is still in a state
of being wound
up, save that the order is now for its provisional winding-up, as
opposed to it being under a final winding-up order.
Whether the
winding-up order will ultimately be discharged, or whether a final
winding-up order will be granted, can only be determined
in due
course. As regards the costs of the respondent, it is appropriate
that its costs, including the costs consequent upon the
employment of
two counsel, be paid by Selective as part of the costs in the
administration of Selective in the winding-up.
The
order
[99]
I would therefore have granted the following order:
1
The appeal is upheld to the extent set out in paragraph 3 below.
2
The respondent’s costs of the appeal, including the costs
consequent upon the
employment of two counsel, are directed to be
paid by the appellant as part of the costs of administration in its
winding-up.
3
The final winding-up order granted by the high court is set aside and
substituted with
the following order:
‘(a)
The respondent is placed under a provisional winding-up order;
(b)
The respondent and all interested parties are called upon to show
cause before this court sitting at
Pretoria at 10h00 on 22 July 2025,
or as soon thereafter as the matter may be heard, why a final
winding-up order in respect of
the respondent should not be granted;
(c)
The applicant is directed to serve a copy of this order on the
respondent at its registered address
forthwith;
(d)
The applicant is directed to publish a copy of this order in the
Government Gazette, the Sowetan and
City Press newspapers on or
before 27 June 2025.’
P
A KOEN
JUDGE
OF APPEAL
Norman AJA
(Mokgohloa ADP and Mocumie JA concurring):
[100]
I have had the pleasure of reading the judgment of my brother Koen JA
(the first judgment). I am grateful to him for the narration
of the
facts. However, there are some facts that I wish to record in line
with my reasoning. I respectfully part ways with the
first judgment
on the order and the findings upon which it is based.
[101]
In the first judgment it is stated that Selective ‘presents
itself as an investment company’, however, the Commission in
its founding affidavit described Selective as follows:
‘SEI 1 was
established, during or about 2007, to be an investment company for
small investors to invest primarily on the Johannesburg
Stock
Exchange (“JSE”) and also to take advantage of Broad-
Based Black Economic Empowerment and other investment opportunities.’
[102]
It also attached annexure GS1, showing several name changes of
Selective. Annexure GS1 is a company report, from Lexis SA
Company,
describing the principal business of Selective as ‘investments’.
It appears from the documentation attached
by the Commission that
Selective is indeed an investment company.
[103]
For context, the application that was made by the Commission in terms
of s 81 (1) (f) of the Act, is relevant for the purpose of
defining the scope and standing of the Commission; and in determining
whether it should
benefit from the just and equitable standard set
out in the Act. That enquiry, in my view, will have a bearing on the
order which
I intend to make in the end.
In
the high court
[104]
The parties agreed that the issues for determination by the high
court were: First, whether the Commission had complied with
the
provisions of s 81 (1)(f)(i) and (ii) of the Act and was
entitled to a winding-up order. Second, whether the Commission as a
regulator, in terms of s 344
(h) of the 1973 Act read together
with the Act, was entitled to an order under the rubric of just and
equitable, in winding-up Selective.
[105]
Selective had raised certain points in limine, such as that
the Commission lacks standing to bring winding-up proceedings under
the rubric of just and equitable; lis alibi pendens, because
the Commission had brought an application seeking to have some
directors of Selective declared as delinquent directors;
and that
certain documents relied upon by the Commission constituted hearsay
evidence, as they have not been supported by affidavits.
All the
points in limine were dismissed. Selective also applied for
leave to file a further or supplementary affidavit and that
application was also dismissed.
[106]
The high court made the following findings: The Commission is an
interested person as contemplated in s 79, read with item
9 of
schedule 5 of the Act, and that those provisions bestow authority on
the Commission to launch the winding-up proceedings.
A reliance on
s 344(h) is not only limited to creditors of a company,
nor does the company need to be insolvent. The Commission is not an
entity listed
in s 346 that would entitle it to launch the
proceedings. The requirements in s 81(1)(f) are technical and
not substantial. Those requirements have not been met and for that
reason Selective cannot be liquidated based
on the provisions of s
81(1)(f). In terms of s 262 of the 1973 Act, the Commissioner
could apply to court for the liquidation of the company where it is
just and
equitable to do so.
[107]
The high court also found that Selective was insolvent. It based this
finding mainly on the audited financial statements for
the 2018
financial year, which according to the high court, revealed that
Selective made an operating loss of more than R11 million;
it used
the capital raised through the sale of its shares to purchase shares;
it deals with public money and making a loss of this
nature must of
necessity mean that its liabilities exceed its assets; its assets are
the shares in other companies and on the face
of it , it seems clear
that Selective is insolvent.
[108]
It also relied on the 2011 report issued by the Financial Services
Board which reported that Selective had made a loss of
34% and that,
according to the high court, became clear that Selective was
conducting business in insolvent circumstances; it will
be in the
interests of the shareholders and would be just and equitable to wind
up Selective; the court is obliged to develop the
common law in terms
of s 158 of the Act; and because the matter was argued fully there
was no need to grant a provisional order,
but a final winding-up
order.
In
this Court
[109]
Selective submitted that when the high court made the finding that
the requirements set out in s 81(1)(f)(i) and (ii) of the Act
were not met, that ought to have been the end of the matter. The high
court, by winding-up Selective based
on the finding that it was
insolvent, in circumstances where the Commission had accepted that
Selective was solvent, erred. That
finding was contrary to the
pleaded case that Selective was called to meet and thus constituted a
material misdirection. As a result
of the findings of the high court,
not based on the pleaded case, Selective contends that it could not
have pleaded facts dealing
with the case based on insolvency because
that was not a case it was called upon to meet.
[110]
Selective submitted further, that the high court erred in relying on
s 344 (h) of the 1973 Act because it (Selective) was solvent.
It contended that the Commission had no standing to liquidate
Selective based
on the just and equitable standard. To do so is not
in the public interest because Selective does not use public purse
funding.
It contended that it was solvent and there has been no
misappropriation of funds. It further submitted that granting a
winding-up
order will do more harm to investee companies of
Selective, its stakeholders and their families. It contended that the
Commission
was using liquidation proceedings to enforce compliance
with its statutory mandate. The liquidation of
a company on the basis that it is just and equitable can only happen
if the company is insolvent as envisaged
in s 79 of the Act.
[111]
The Commission conceded that the requirements of s 81(1)(f) of
the Act were not fulfilled and thus the high court was correct in
refusing to wind up Selective on that basis. The Commission
relied on
the same contraventions upon which the winding-up application was
based, in terms of s 81(1)(f), for the support of a winding-up
order of Selective under the just and equitable standard. It
reiterated its stance, that there
were persistent contraventions of
ss 22(1); 30(1) (failure to prepare financial statements for the
years 2014, 2015, 2016 and 2017);
24(4) and 50(1)(b) (failure
to maintain a securities register); 61(7) (convening of shareholders
meeting); 72(4) ( no social or ethics committee);
73(6) (no minutes
of the audit and social committees); 86(4)(filling of a company
secretary’s vacancy); 94(6) (failure to
fill vacancies on the
audit committee); 108(6) (failure to raise capital in terms of its
prospectus) and 214(1)(d) (making false statements, reckless
conduct and failure to provide an alternative trading platform) of
the Act. That Selective failed
to prepare its financial statements
for the 2014 and 2015 years and was accordingly not able to apply the
objective requirement
that the company will satisfy the solvency and
liquidity test.
[112]
The Commission further submitted that the shareholders were not
receiving dividends, and, in this regard, reliance was
placed by the
Commission on the 2017/2018 annual report. This report, contends the
Commission, shows that Selective is not able
to meet its day-to-day
liabilities in the ordinary course of its business. Section 79(3)
does not, by implication, contemplate
a separate application by
another person. The dysfunction of Selective can only be cured by a
winding-up order and the liquidator
to unravel the disorder. The
Commission prayed for the dismissal of the appeal, with costs
consequent upon the employment of two
counsel.
Discussion
[113]
As a starting point, I deal with a point that may appear to be
trivial, yet it bears heavily on the outcome reached
by the high
court. Although the high court had dismissed the application for the
admission of a further or supplementary affidavit,
upon an
application by Selective, it nevertheless had regard to it in its
judgment. It stated at paragraphs 101 and 102:
‘It
is however also clear that the respondent is insolvent. Despite
claiming in the supplementary affidavit that all audited statements
had been filed and uploaded on caselines no such documents are before
court.
The
only audited financial statements before court are those for the 2018
financial year. In those statements it is clear that the
respondent
made an operating loss of more than R11 million. Respondent used the
capital raised through the sale of its shares to
purchase shares. It
deals with public money and making a loss of this nature clearly must
of necessity mean that its liabilities
exceed its assets. Its assets
are the shares in other companies. Apart from the day-to-day expenses
such as rent and salaries,
the liability to its own shareholders
still remain.’
[114]
There is a fundamental difficulty with the approach adopted by the
high court in this regard. It dismissed the application
to receive a
further or supplementary affidavit from Selective. However, as
indicated in paragraph 101, it considered the contents
of the
supplementary affidavit, selectively, in its judgment, in a manner
that was prejudicial to Selective. If the supplementary
affidavit had
been admitted into evidence, the high court would have raised the
issue of the uploading of the audited financial
statements on case
lines, with Selective, instead of raising it in the judgment. In any
event, after dismissing the application
for the admission of the
further or supplementary affidavit, the high court, in my view, was
barred from considering that affidavit
in its judgment, as it was
functus
officio in
relation to that aspect.[68]
[115]
In Mncwabe
v President of the Republic of South Africa and Others; Mathenjwa v
President of the Republic and Others,[69]
the Constitutional Court found that ‘this doctrine entails that
once something is done, it cannot be undone, reversed or
otherwise
altered by the decision-maker. This is because the decision maker
would have exhausted her authority and relinquished
her jurisdiction
over the matter by taking a final decision. The finality of the
decision is central to the doctrine’s operation.
The doctrine
promotes certainty and stability, and it ameliorates prejudice and
injustice occasioned to those who would rely on
otherwise wavering
decisions’.[70] It
follows that , in reaching its findings, the high court revisited the
further or supplementary affidavit that it had dismissed,
and by so
doing , it erred.
Facts
that were ignored by the high court
[116]
It is common ground that Selective had received various
compliance notices from the Commission for failure to comply with its
statutory
obligations in terms of the Act. Those notices were issued
over the years. Selective complied with some and did not comply
timeously
with others and had conveyed the difficulties that it was
experiencing in complying timeously with the notices to the
Commission.
A thorough scrutiny of the notices and correspondence
reveals that Selective did not remain supine when it was served with
notices.
In some instances, it had asked for support and guidance
from the Commission. However, the Commission did not indicate its
ability
to provide such guidance or support, despite it being part of
its responsibilities.
[117]
The Commission relies, as one of the grounds for winding-up
Selective, on the approximate 34% loss of the invested monies
that
was incurred by Selective at some point. That loss is based on a
report that was issued by the Financial Services Board on
28 February
2010. Selective admitted this loss and explained that an investor may
incur such a loss without blame on the part of
the directors. It is
an important fact that the loss occurred approximately ten years
before the institution of the winding-up
proceedings and 13 years
prior to the issuing of the final winding-up order by the high court.
The fact that a company has made losses ten years ago does not
automatically mean that a company is insolvent.
[118]
Selective had attached, to its answering affidavit, an Abridged
Certificate for Annual Returns issued by the Commission
on Wednesday,
9 September 2020, which recorded:
‘CIPC
received an annual return filing for SELECTIVE EMPOWERMENT INVESTMENT
1 with enterprise number 2007/033697/06 for the following
annual
return year (s): 2013 . . . 2014 . . . 2015 . . . 2016 . . . 2017 . .
. 2018 . . . [and] . . . 2019.’
It
bears the name of Adv. Rory Voller: Commissioner CIPC.
[119]
This certificate and its authenticity has not been placed in issue by
the Commission in the replying affidavit. As such,
it must be
accepted as correct and any allegations that at the time that the
matter was heard by the high court there were outstanding
returns
must be rejected.
[120]
Selective attached to its answering affidavit a certification by the
company secretary to the effect that:
‘In
terms of Section 88(2)(e)
of the Companies Act 71 of 2008, as amended, I certify that the
company has lodged with the Commissioner all such returns as are
required of a public company in
terms of the Act and that all such
returns are true, correct and up to date’.
It
must accordingly be accepted that both certificates from the
Commission and the one from South African Revenue Service (SARS)
were
accepted by the Commission, otherwise the Commission would have
challenged them.
[121]
On or about 29 January 2020, the legal representatives of Selective
wrote to the Commission and referred to a meeting that
was held
between the parties on 8 August 2019. They recorded that the share
register had been updated and attached it as ‘Annexure
A’
to the letter. They also indicated that Selective had entered into a
Service Level Agreement with Singular Systems on
19 November 2019 and
mentioned the services that Singular Systems was providing. A status
report from Singular Systems was also
attached. They further
indicated that it was not in the interests of the company to be
liquidated. The Commission chose not to
deal with these facts in its
replying affidavit. It follows that they ought to be accepted in
favour of Selective in line with
the principle enunciated in
Plascon-Evans
Paints Ltd v Van Riebeek Paint (Pty) Ltd.[71]
[122]
Similarly, a certificate issued by SARS reflecting the ‘tax
compliance status’ of Selective, dated 11 September
2020, as
being compliant was not considered by the high court. Selective
attached the certificate from SARS to its answering affidavit.
Nothing was said by the Commission about it, in fact the replying
affidavit makes no reference to the relevant paragraph attaching
the
SARS document at all. In the first judgment it is suggested that,
that certificate ‘purports’ to be a SARS
certificate. There are no allegations made by the Commission to
support that finding. That certificate too,
must be accepted as
evidence in support of Selective’s version.
[123]
Selective stated that it was functioning under the hand of a new
board. The independent auditors’ report, Mkiva Incorporated,
dated 30 October 2018 stated that ‘the
annual financial statements [were] prepared [in respect of Selective
as a going concern] in accordance with
all applicable International
Financial Reporting Standards (IFRS), which includes all applicable
IFRSs, International Accounting
Standards (IASs) and Interpretations
issued by the IFRS Interpretations Committee and the requirements of
the . . . Act’.
They further recorded that on a going concern
basis, they presumed that funds will be available to finance future
operations and
that the realisation of assets and settlement of
liabilities, contingent obligations and commitments will occur in the
ordinary
course of business. The auditors reflected on the errors
that were on the share register. They further stated that a data
analytics
firm was appointed, and the errors were corrected. Those
errors were recorded on the financial statements. They confirmed that
where there were lapses in compliance, Selective had rectified those.
[124]
An investigation report, dated 19 September 2017, filed by the
deponent to the founding affidavit, Mr Gideon Johan Schutte (Mr
Schutte),
on behalf of the Commission, confirms the version of
Selective that it had complied with the notices, although it accepted
that
compliance was not timeous. For example, Mr Schutte, in his
report, listed numerically the requests made to Selective in the
20
January 2017 compliance notice. Those are:
‘1. To submit to
the Commission copies of the Annual Financial Statements for the 2014
and 2015 financial years signed by the registered
auditor. Copies of
the Annual Financial Statements must also be approved and signed by
the directors of the relevant corporate
entity.
2. Provide reasons to the
Commission why the annual financial statements of 28 February 2012
were not timeously prepared by the
directors of the company.
3. To submit to the
Commission the minutes of the annual general meeting called as per
section 61 (7) of the . . . Act . . .
4. To submit to the
Commission a copy of a securities register.’
[125]
He stated in his report in relation to the above listed requests:
‘The Selective
Empowerment Investment 1 Limited complied with requests 1, 2 and
3. The Companies Tribunal made an order that the Annual General
Meeting should be convened within six weeks after case 10067/2015
was
finalised by the Gauteng Division of the High Court of South Africa.’
(My emphasis.)
[126]
Strangely, although Mr Schutte recorded that there was compliance
with three out of four requests, in the recommendations,
he recorded
that there must be submission of the annual financial statements for
the 2016 and 2017 financial years; Selective must
provide reasons why
the financial statements were not timeously provided and why annual
general meetings were not held timeously;
to provide proof that the
securities register has been maintained according to prescribed
standards; and provide a report on how
the non-compliance identified
during the audit will be remedied to avoid a repeat of the
non-compliance .
[127]
I mention this example because Mr Schutte accepted that there was
compliance with the demand for the 2014 and 2015 financial
years.
Instead of issuing a separate notice demanding compliance with the
2016 and 2017 financial years, he included such demand
in his
response to the 20 January 2017 compliance notice. Again, although Mr
Schutte had made reference to the decision of the
Tribunal, he
continued to demand an explanation on why annual general meetings
were not timeously held. This is just one of the
examples that show
some inconsistencies in the notices and the conduct of the
Commission.
[128]
All these facts and the documentation referred to in the preceding
paragraphs, considered objectively, do not support the
finding in the
first judgment that Selective, inter alia, ‘failed to
provide proof of proper compliance’. The documents referred to,
above, demonstrate that even if there were
delays in complying with
the notices, by the time the high court heard the application there
were documents that were placed before
it to prove compliance with
the Commission’s notices. Most importantly, the financial
statements for the 2017/2018 do not
evince any concerns such as that
the substratum of the company has changed or that it may be
insolvent.
Was
there adequate notice to Selective that it was being wound up based
on insolvent status?
[129]
Selective contended that the case it was called upon to meet was
based on it being solvent and not insolvent. It contended
that for
that reason it was not heard on the allegations of insolvency. In the
first judgment, it is found that Selective was given
notice of the
winding-up of the company based on the just and equitable standard.
[130]
In the correspondence exchanged between the parties about the
winding-up of Selective, there is no mention of the just and
equitable standard. The Commission made it clear that it would seek
the winding-up of Selective based on s 81(1)(f) of the
Act. This meant that the winding-up of Selective would be based on
its solvent status. On 6 March 2020, the
Commission in a letter to the legal representatives of Selective
persisted in its stance that there was no
compliance with the notice
and indicated, inter alia,
that:
‘.
. . .
4.
CIPC therefor continue with case no 6275/2018 and will file an
application to wind up the company in terms of section 81(1)(f)
of the Companies Act 71 of 2008.
. .
. .’
[131]
Section 346 of the 1973 Act deals with the procedure that must be
followed when there is an application to wind up a company
(legal
requirements). These include a certificate that accompanies the
application from the Master, issued not more than ten days
before the
date of the application, to the effect that sufficient security has
been given for the payment of all fees and charges
necessary for the
prosecution of all winding-up proceedings. Before that application is
presented to the court, a copy of the application
and of every
affidavit confirming the facts stated therein shall be lodged, for
example, with the Master of the High Court (the
Master), served on a
registered trade union for employees; and on SARS. Before the
hearing, the applicant is required to file an
affidavit which sets
out the manner in which service of the application as aforementioned
was effected. Most importantly, the affidavit
must set out facts upon
which it relies for its allegations that a company is insolvent
because it is unable to pay its debts when
they become due and
payable.
[132]
I mention these processes because none of them have been adhered to
in this matter. The process that I have outlined above
is elaborate
because the purpose thereof is to ensure that the company to be wound
up is given sufficient notice and is afforded
an opportunity to deal with the facts of the alleged insolvent
status, adequately. The Master is also afforded an opportunity
to
satisfy himself or herself that on the facts it appears to him or her
that the company may be insolvent. These processes are
critical
because when a company is being wound up on the basis that it is
commercially insolvent, it, as a respondent, in resisting
the relief
sought, bears the onus to prove that it is solvent.
[133]
It is for that reason that facts relating to its debts, assets and/or
liabilities must be apparent from the founding affidavit.
That
is the adequate notice that is required when a drastic order with
serious implications, not only for Selective but its other
companies,
such as the winding-up, is sought. Adequate notice is an essential
element of procedural fairness in legal proceedings.
It ensures that
a party is given sufficient information and time to prepare their
case and respond to the issues at hand.
[134]
There is no evidence at all that has been adduced by the Commission
to support its general sweeping statement that the company
may be
insolvent. Selective has about 26 000 investors and holds on
behalf of the shareholders, shares to the value of R110 420 785.26
before the high court or before this Court. Their rights have not
been considered nor mentioned at all prior to the order being
made
because none of the s 346 requirements were met.
[135]
The Commission relied, for example, on presentations made by Mr Maja
on 4 July 2017, where he was providing information about
the status
of the Selective companies and not just Selective in this case. He
sought help and support to ensure that shareholders
and their monies
are protected; to assist in obtaining legal opinion and advice on day
to day running of the Selective companies;
and to put the companies
under curatorship, if deemed necessary. The Commission relied on what
Mr Maja said about curatorship in
justifying its winding-up
application. Mr Maja admitted the allegations, but stated that the
presentation that he made had since
been overtaken by events
including the appointment of the current board of directors. He
sought assistance from the Commission
as a regulator. He denied that
he sought the placement of Selective under curatorship in the legal
sense. The application for the
winding-up of Selective was brought
some three years after the presentation by Mr Maja. This is the
context in which Mr Maja made
the statements the Commission now
relies upon for the liquidation of Selective, which the high court
ignored totally.
[136]
The investors have an interest in the monies invested in the company.
They have a right to bring winding-up applications against
Selective
if they are not satisfied with the manner in which the company is
being run. The Legislature, when promulgating the Act,
was alive to
the fact that the rights of the shareholders (investors in this case)
or directors must be taken into account. Absent
adequate facts based
on the inability of a company to pay its debts, as envisaged in s 345
of the 1973 Act, Selective is justified
in its complaint that there
was no adequate notice that it would be wound up on the allegations
of insolvency.
Is
Selective insolvent?
[137]
According to Meskin, ‘[t]he test when a company is to be
declared insolvent, is whether the company in winding-up can
pay its
debts. It requires a weighing up of assets and liabilities, and not
merely a determination of whether it is commercially
solvent’.[72]
For instance if one has regard to the very annual report of 2018
relied upon by the Commission and the high court, the auditors
recorded that the company’s net asset value was about
R145 million. The audit committee recorded that the company
complies
in all material respects with the requirements of the Act.
[138]
The objectives and functions of the Commission are set out in
ss 186(1) and 187(1) to (4), respectively, and have been quoted
extensively
in the first judgment. The Act itself provides for its
purpose in s 7 as follows : ‘[T]o: promote compliance with
the
Bill of Rights as provided for in the Constitution in the
application of company laws’ (s 7(a)); ‘balance
the rights and obligations of shareholders and directors within
companies’ (s 7(i)), ‘encourage the efficient and
responsible management of companies’ (s 7(j)); ‘provide
for the efficient rescue and recovery of financially distressed
companies, in a manner that balances the rights
and interests of all
relevant stakeholders’ (s 7(k)). This means that when the
objectives and functions of the Commission
are considered in relation
to companies, including Selective, they must be viewed with the
constitutional lens provided for in
s 7.
[139]
A reliable determinant of factual or commercial insolvency is a
company’s inability to pay its debts when they become
due and
payable or where it has more liabilities than assets on its balance
sheet. That is the reason that s 345 of the 1973 Act
is utilised as a
safeguard to avoid liquidating a company without evidence to prove,
even at a prima
facie
level, that it may be insolvent.[73]
[140]
Section 345 reads:
‘(1)
A company or body corporate shall be deemed to be unable to pay its
debts if-
(a)
a creditor, by cession or otherwise, to whom the company is indebted
in a sum not less than
one hundred rand then due-
(i)
has served on the company, by leaving the same at its registered
office, a demand
requiring the company to pay the sum so due; or
(ii)
in the case of anybody corporate not incorporated under this Act, has
served such demand
by leaving it at its main office or delivering it
to the secretary or some director, manager or principal officer of
such body
corporate or in such other manner as the Court may direct,
and the company or body corporate has for three weeks thereafter
neglected
to pay the sum, or to secure or compound for it to the
reasonable satisfaction of the creditor; or
(b)
any process issued on a judgment, decree or order of any court in
favour of a creditor of the
company is returned by the sheriff or the
messenger with an endorsement that he has not found sufficient
disposable property to
satisfy the judgment, decree or order or that
any disposable property found did not upon sale satisfy such process;
or
(c)
it is proved to the satisfaction of the Court that the company is
unable to pay its debts.
(2)
In determining for the purpose of subsection (1) whether a company is
unable to pay its
debts, the Court shall also take into account the
contingent and prospective liabilities of the company.’
(Emphasis added.)
[141]
In this matter there is no question of creditors being involved and
therefore one can accept that the provisions of s 345
have not been
invoked. There is no creditor to whom the company was indebted that
has served on it a demand requiring it to pay
the amount due. There
are no allegations that for three weeks the company had neglected to
pay the sum demanded and there are also
no allegations that the
sheriff had returned what is known as the nulla bona return.
[142]
Insolvency of a company may not be inferred, unless such inference is
drawn from positive facts relating to the company’s
insolvent
status due to, amongst others, the company’s non- compliance
with a s 345 demand. Section 344 deals with instances
where a
company may be wound up by the court. It is telling that where a
company is deemed to be unable to pay its debts, s 344(f)
links s 345 to the inability to pay its debts by stating ‘as
described in [s] 345’ of the 1973 Act.
[143]
This Court, in Lancelot
Stellenbosch Mountain Retreat (Pty) Ltd v Gore NO and Others,[74]
stated that ‘[a]ffidavits in motion proceedings serve to define
not only the issues between the parties, but also to place
the
essential evidence before the court. They must contain factual
averments that are sufficient to support the relief sought.’[75]
[144]
In the first judgment, reliance is placed on Boschpoort
Onderneming (Pty) Ltd v Absa Bank Ltd (Boschpoort),[76]
which deals with forms of insolvency, being factual and commercial
insolvency. Of importance is that both forms of insolvency have
a
bearing on the company’s liabilities and assets. Factual
insolvency occurs where a company’s liabilities exceed its
assets, while commercial insolvency occurs when the company is in
such a state of illiquidity that it is unable to pay its debts
even
though its assets may exceed its liabilities. Tritely, there must be
facts to support either form of insolvency.
[145]
For instance in Boschpoort, the brief factual matrix relating
to the company’s assets and liabilities was that it had been in
arrears in respect of
its obligations to pay the bank more than R29
million, it had trade creditors to whom it was indebted in excess of
R11 million,
it owed the First Rand Bank Ltd approximately R 9
million and owed SARS an amount of about R2 million. It had been
served with
a demand in terms of s 345 of the 1973 Act and was
in default in respect thereof. These facts set the Boschpoort
decision apart from the facts of the case at hand. I say so for
the following reasons.
[146]
First, in Boschpoort there was a s 345 demand which was not
met within the three weeks, with payment or security to the
reasonable satisfaction of the
creditor. The court was therefore
furnished with facts which demonstrated that the company was not able
to pay its debts. Second,
Part G of chapter 2 of the Act excludes the
application of ss 343, 344, 346 and 348 to 353 of the 1973 Act, where
an application
relates to the winding-up of a solvent company.
[147]
Accordingly, absent the facts relating to the assets of Selective,
what its liabilities are and what are the debts that it
has been
unable to pay, the winding-up order was not justified. The
Commission sought a final winding-up order and ‘had to
establish [its] case on a balance of probabilities rather than
on the
lower level of prima
facie
basis, which is the degree of proof required for a provisional
order’.[77] On the
facts, it failed to satisfy the onus which it attracted. The high
court should have exercised its discretion in favour of
Selective and
refused the relief sought by the Commission.
Does
the Commission have standing to bring winding-up proceedings based on
the just and equitable standard?
[148]
Selective raised as a point in limine, squarely and
unambiguously, that the Commission has no standing to seek an order
to wind it up based on the rubric of just and
equitable. As
aforementioned the high court dismissed the point in limine.
[149]
The persons who may bring winding-up proceedings against a company
are provided for in s 344 of the 1973 Act,[78]
for example, instances where a company resolves that it be wound up,
if it is a public company its members have been reduced to
below
seven, or 75% percent of its share capital is lost. Section 344(f)
makes reference to the provisions of s 345 of the 1973 Act.
[150]
In dealing with this question, one must resort to the provisions of s
81 of the Act. I refer to it solely for interpretation
purposes. The
relevant parts of s 81 read as follows:
‘(1)
A court may order a solvent company to be wound up if–
. . . .
(c)
one or more of the company’s creditors have applied to the
court for an order to wind
up the company on the grounds that –
(i)
the company’s business rescue proceedings have ended in the
manner contemplated
in section 132(2)(b) or (c)(i) and
it appears to the court that it is just and equitable in the
circumstances for the company to be wound up; or
(ii)
it is otherwise just and equitable for the company to be wound up;
(d)
the company, one or more directors or one or more shareholders have
applied to the court for
an order to wind up the company on the
grounds that –
(i)
the directors are deadlocked in the management of the company, and
the shareholders
are unable to break the deadlock, and –
(aa)
irreparable injury to the company is resulting, or may result, from
the deadlock; or
(bb)
the company’s business cannot be conducted to the advantage of
shareholders generally, as a result
of the deadlock;
(ii)
the shareholders are deadlocked in voting power, and have failed for
a period that includes
at least two consecutive annual general
meeting dates, to elect successors to directors whose terms have
expired; or
(iii)
it is otherwise just and equitable for the company to be wound up;
. . . .
(f)
the Commission or Panel has applied to the court for an order to
wind up the company on the grounds that –
(i)
the company, its directors or prescribed officers or other persons in
control of the
company are acting or have acted in a manner that is
fraudulent or otherwise illegal, the Commission or Panel, as the case
may
be, has issued a compliance notice in respect of that conduct,
and the company has failed to comply with that compliance notice;
and
(ii)
within the previous five years, enforcement procedures in terms of
this Act or the Close
Corporations Act, 1984 (Act No. 69 of 1984),
were taken against the company, its directors or prescribed officers,
or other persons
in control of the company for substantially the same
conduct, resulting in an administrative fine, or conviction for an
offence.
. . . .’ (Emphasis
added.)
[151]
In answering the question ‘what
is just and equitable?,
in
the context of winding-up of companies where it is just and equitable
to do so
D A Smallbone[79] states:
‘12.
In identifying the cause of action, consideration of the statute is
not only vital: it is the starting point. It is a truism
that
satisfaction of a condition that something be “just and
equitable” must begin with the terms of the power itself.
What
is it that the statute confers power to do? What is it that the
statute says must be “just and equitable” before
that
power can be exercised?
13. From that starting
point, one turns to consider the purpose for which the power was
conferred. Sometimes these objects are expressly
stated in the
statute. When they are not expressly stated, or not stated
exhaustively, “they must be determined by implication
from the
subject matter, scope and purpose of the Act.’
[152]
In Bato
Star Fishing (Pty) Ltd v Minister of Environmental Affairs and
Others,[80]
Ngcobo J, states the following, when dealing with the interpretation
of statutes in a constitutional context:
‘The
Constitution is now the supreme law in our country. It is therefore
the starting point in interpreting any legislation. Indeed,
every court “must promote the spirit, purport and objects of
the Bill of Rights” when interpreting any legislation.
That is
the command of section 39(2). Implicit in this command are two
propositions: first, the interpretation that is placed
upon a statute
must, where possible, be one that would advance at least an
identifiable value enshrined in the Bill of Rights;
and second, the
statute must be reasonably capable of such interpretation. This flows
from the fact that the Bill of Rights “is
a cornerstone of [our
constitutional] democracy.” It “affirms the democratic
values of human dignity, equality and
freedom.” In interpreting
section 2(j),
therefore, we must promote the values of our constitutional
democracy. But what are these values?’[81]
[153]
This constitutional context approach to interpretation of the
provisions of the Act is mandated by the Act itself. The foundational
principle of the Act is, inter alia,
the transformation of the commercial laws. That is the
legislative scheme. The Commission and its existence are anchored on
the Act. It cannot act outside the ambit of that
Act. As a Regulatory
body, it is a creature of statute.
[154]
The Legislature when formulating s 81, consciously placed the ‘it
is otherwise just and equitable’ in instances where the
applicant in a winding-up of a solvent company is: the company itself
that has adopted a special
resolution to be wound up voluntarily
(subsec (1)(a)); or the business rescue practitioner who
brought the application (subsec (1)(b)); or where one or more
of the company’s creditors (subssec (1)(c)) brought the
application; and; by one or more directors or one or more
shareholders where there is an unbreakable deadlock of either
the
directors or the shareholders (subsec 1(d)).
[155]
Where there is provision for the Commission or Panel to apply for the
winding-up of the company, in s 81(1)(f), the Legislature did
not insert, the words ‘it is otherwise just and
equitable for the company to be wound up’, as it did in
s 81(1)(c) and (d) as aforementioned. If the words
are not included in s 81(1)(f), there is accordingly no legal
basis for the Commission or the high court to include them.
[156]
The Legislature, by so doing, in my view, wanted to avoid the very
mischief that the Commission committed in this case, being:
First,
the Commission failed to take the steps that were legally permissible
and available as enforcement procedures provided for
in s 171(7)(a)
and (b)
of the Act. For the sake of completeness those options are: to apply
to court for the imposition of an administrative fine (subsec
7(a));
or refer the matter to the National Prosecuting Authority for
prosecution as an offence in terms of s 214(3), and subsec 7(b).
It may not do both in respect of any particular compliance
notice.[82] In other words, it
ignored the remedies available to it. The Commission proffered no
explanation for such failure. Second, despite
its failure to act in
terms of s 171(1)(a)
or (b),
it approached the court for a winding-up of Selective as a solvent
company in terms of s 81(1)(f),
when it knew that in order for it to succeed it must have first
utilised the remedies available to it. Notwithstanding its
non–compliance
with the remedies available to it, it proceeded
with the application.
[157]
Absent the jurisdictional facts, as correctly found by the high
court, the Commission did not satisfy the requirements of
s 81(1)(f).
That ought to have been the end of the matter because the absence of
those jurisdictional facts was fatal to the Commission’s
application. Instead of dismissing the application the high court
threw the Commission a lifeline based on the ‘just and
equitable’ standard.
[158]
The absence of the words ‘it is otherwise just and equitable
for the company to be wound up’ in s 81(1)(f), was
deliberate. First, the Legislature must have been alive to the fact
that a regulator such as the Commission may bring winding-up
proceedings against a company prior to it (the Commission) satisfying
or completing all the enforcement processes provided for
in the Act,
hence the pre-requisites of an administrative fine or a conviction.
Second, the Legislature, omitted the words in order
to keep the
powers of the Commission under scrutiny and to minimise prejudice to
companies that have disputes with the Commission.
It wanted to avoid
conflation of non- compliance infractions in terms of the company
laws with factual or commercial insolvency.
Under the ‘just and
equitable’ standard there is a risk of the Commission using the
term that it is acting in the public
interest whilst causing harm to
the company.
[159]
That, in fact, is what the Commission has done in this case. It has
brought the winding-up proceedings of a solvent company,
but in the
same proceedings relied on the insolvency of the company inferred
from its non-compliance with its notices. It advanced
no facts that
relate to the insolvency or commercial insolvency of Selective.
[160]
The mischief of the Commission is stated in its founding affidavit as
thus:
‘. . . .
B.
PURPOSE OF THE APPLICATION
7.
This is an application for the winding up of SEI 1 in terms of
section 81(1)(f) of the Companies Act, 2008, alternatively,
that it will be just and equitable if SEI 1 is wound up;
. . . .
J2.
Just and Equitable
80.
Notwithstanding that SEI 1 is liable to be wound up in terms of
section 81(1)(f) of Section 108(6) of Act 71 of 2008, it will
be just and equitable if SEI 1 is wound up.
81.
SEI 1 is carrying on its business recklessly, constantly
transgressing the provisions of Section
108(6) of Act 71 of 2008,
which evinces a lack of any genuine concern for the prosperity of the
respondent.
74.
(sic) Mr Maja himself was of the opinion, as set out in his
presentation that:
74.1.
the regulatory bodies should assist SEI 1 to ensure that shareholders
and their monies are protected;
74.2.
the regulatory bodies give an opinion on what needs to be done;
74.3.
SEI 1 be placed under curatorship, if deemed necessary, under the
current circumstances;
82.
The directors, or at least Mr Maja on behalf of SEI 1, questions the
viability of SEI 1
and having regard to the continued dispute with
Virtus and lack of staff of SEI 1, after taking over the
responsibilities from
Virtus, it is doubtful and highly unlikely that
SE1 can achieve its raison d’être.
83.
I submit that it will, furthermore, be just and equitable if SEI 1 is
wound up.
. . . .’ (Emphasis
added.)
[161]
The Commission relied on the exact same alleged transgressions by
Selective which were placed before the high court in support
of the s
81(1)(f)
application. The limited powers of the Commission in the winding-up
of a company are consistent with its objectives, which are,
amongst
others, the promotion of education and awareness of company and
intellectual property laws and related matters; and the
promotion of
compliance with the Act and any other applicable legislation and the
efficient effective and widest possible enforcement
of the Act.[83]
[162]
In Recycling
and Economic Development Initiative of South Africa NPC v Minister of
Environmental Affairs; Kusaga Taka Consulting (Pty)
Ltd v Minister of
Environmental Affairs,[84]
this Court had to deal with the question whether s 157(1)(d)
of the Act gave the Minister the power to wind up a solvent company
in the public interest, this Court found:
‘Of course, there
may be indications in the statute itself that ‘‘person’’
includes the government as represented
by a minister. But there is no
such indication in the . . . Act. It is apparent that when a minister
or regulatory
agency
established by statute exercises a public power or performs a public
function they do so per se in the public interest. When
the lawmaker intends to give a minister the power to bring
proceedings specifically in the public interest, it says so.’[85]
(Emphasis added.)
These
remarks apply equally in this case.
[163]
In the first judgment, at paragraphs 56 and 57, it is found that the
Commission had the power to rely on the past infractions
to meet a
case of ‘just and equitable’ as envisaged in the Act. I
disagree, with respect, for these reasons:
(a)
Section 81(1)(f) makes no provision for the Commission to
bring a winding-up of a solvent company based on a ‘just and
equitable’ standard.
(b)
As a statutory entity, a winding-up application must be based on it
(the Commission) meeting the jurisdictional
facts set out in s
81(1)(f)(i) and (ii) of the Act and nothing else. Section
81(1)(f) was enacted for that purpose.
[164]
The injustice that would result if the Commission were to benefit
from the use of the ‘just and equitable’ standard
is that
the Commission would simply issue compliance notices, one after the
other, and not pursue those up to the stage where there
are
administrative fines or convictions imposed. Thereafter, and when it
is convenient to it, bring winding- up proceedings on
the grounds
that it is ‘just and equitable’ to do so.
[165]
Having regard to the express language employed in s 81(1)(f)
of the Act and the purpose of the provisions relating to the
Commission, the Commission has no standing to bring winding-up
proceedings
against a company on the ‘just and equitable’
standard.
Is
the Commission an interested party as envisaged in s 79(3)?
[166]
In the first judgment, one of the findings at paragraphs 59
and 60 is that the Legislature in s 79(3) did not envisage a
situation
where another application must be brought by a third party
for the winding-up of Selective. To do so, it is stated, would be
ludicrous.
It was further found that Selective was wound up on the
ground that ‘it would be just and equitable for Selective to be
wound
up’ on application by the Commission as an interested
person.
[167]
Section 79(1) of the Act provides:
‘(1)
A solvent company may be dissolved by–
(a)
voluntary winding-up initiated by the
company as contemplated in section 80, and conducted either
(i)
by the company; or
(ii)
by the company’s creditors, as determined by the resolution of
the company; or
(b)
winding-up and liquidation by court
order, as contemplated in section 81.
(2)
The procedures for winding-up and liquidation of a solvent company,
whether voluntary or
by court order, are governed by this Part and,
to the extent applicable, by the laws referred to or contemplated in
item 9 of Schedule
5.[86]
(3)
If, at any time after a company has adopted a resolution contemplated
in section 80, or
after an application has been made to a
court as contemplated in section 81, it is determined that the
company to be wound up is or may be insolvent,
a court, on
application by any interested person, may order that the company
be wound up as an insolvent company in terms of the laws referred to
or contemplated in item 9 of Schedule
5.’ (Emphasis added.)
[168]
In Snyders and Others v De Jager (Joinder), the Constitutional
Court, when dealing with a direct and substantial interest for the
purposes of joinder of a party, stated:
‘A
person has a direct and substantial interest in an order that is
sought in proceedings if the order would directly affect such
a
person’s rights or interest. In that case the person should be
joined in the proceedings. If the person is not joined in
circumstances in which his or her rights or interests will be
prejudicially affected by the ultimate judgment that may result from
the proceedings, then that will mean that a judgment affecting that
person’s rights or interests has been given without affording
that person an opportunity to be heard. . .[87]’
[169]
In Absa
Bank Ltd v Naude NO and Others,[88]
this Court dealt with the test applicable where there is a
non-joinder of creditors in an application to set aside a business
rescue plan and whether such failure to join them was fatal to the
relief claimed. This Court set out the test thus:
‘The
test whether there has been non-joinder is whether a party has a
direct and substantial interest in the subject- matter of the
litigation which may prejudice the party that has not been
joined.’[89]
[170]
The enquiry that this Court had to conduct when assessing the
creditor’s interests in the Absa Bank case, above,
applies equally herein. That enquiry must be: ‘Whether the
Commission has a direct and substantial interest in the winding-up of
Selective’. As a regulator, the Commission has no direct
and substantial interest such that it would be prejudiced by the
winding-up
of Selective. It has a right to bring winding-up
proceedings of a solvent company, if it has met the jurisdictional
facts.
[171]
The Legislature realised that there would be instances where a
Commission or shareholder brings an
application for the winding-up of a solvent company in terms of s
81(1)(f)
and whilst that application is pending, a creditor who has
established that the company is unable to pay its debts (for having
failed to meet the s 345 demand), such creditor brings an application
based on the insolvent status of the company. That is what
is
envisaged in the section, otherwise why would the Legislature have
two ‘applications’ in one section? Again, how
can the
Commission that relied on solvency change its stance in the same
proceedings and rely on insolvency? That is a very controversial
approach, which would conflate the grounds for winding-up as
demonstrated above. Consequently, I find that the plain text of the
section envisages two applications.
[172]
The approach I postulate herein is consistent with the limited
grounds upon which the Commission may bring winding-up proceedings
against a solvent company as contemplated in s 81(1)(f). The
Legislature clearly intended that the pending first application would
be based on the solvent status of the company by the
applicant such
as the Commission and the second application by an interested party,
such as a creditor, shareholder or director
or even the company
itself, would bring the application based on the company’s
insolvent status. The Act does not authorise
the Commission to bring
a winding-up of a company based on insolvency.
[173]
The approach contended for in the first judgment would, with respect,
lead to two unconscionable results, namely, that what
was initially a
s 81(1)(f) application by the Commission could simultaneously
change colour just like a chameleon into a s 344 application, by the
same Commission.
Second, it would absolve the Commission from meeting
the jurisdictional facts canvassed above, and afford it a second bite
at the
cherry by changing the grounds for winding-up from solvent to
insolvent without much effort. Over and above, the Commission would
bring the application as the applicant in the s 81(1)(f)
application but also without bringing another application, in the
same proceedings be an interested person and rely on insolvency.
That
would lead to absurdity and unjust results, which the legislature by
no means could have contemplated.
[174]
Lastly, the conclusion in the first judgment, in paragraphs 59
and 60 with respect, does not seem to find support from the findings
of this Court in Boschpoort at paragraphs 12 and 13, where it
is stated:
‘Section
80 of the new Act relates to the voluntary winding-up of a ‘‘solvent
company’’. Section 81 of the
new Act relates to the
winding-up, also of a ‘‘solvent company’’, by
a court. In terms of s 81(1)(c)(ii)
of the new Act (upon which the court below based its decision to
liquidate the appellant), a court may order the winding-up
of a
company where a creditor has applied
for such an order on the grounds
that ‘‘it is otherwise just and equitable for the company
to be wound up.’’
There
have been discordant views on the circumstances under which a company
may be wound up under the new Act, on the one hand,
or the old Act on
the other. It is clear, however, that ss 79 to 81 of the new Act
apply to the liquidation of ‘‘solvent’’
companies. Section 79(3) of the new Act provides, however, that if it
becomes apparent during the liquidation proceedings of a
‘‘solvent’’
company, that it is or may be ‘‘insolvent’’,
the transitional provisions
referred to in item 9 of schedule 5 of
the new Act apply: the winding-up of the insolvent company may take
place under the old
Act.’[90]
(Emphasis added.)
[175]
I accordingly find that the Commission is not an interested person as
envisaged in s 79(3). In this regard, the high court
misdirected
itself in the exercise of its discretion and this Court is at large
to interfere with its decision.[91]
How
is the provisional order of winding-up of Selective prejudicial?
[176]
Once a provisional order is granted, the company is divested of its
assets, and they are immediately placed in the hands of
the Master.
The liquidators take control of the assets. All contracts of
employment are automatically terminated. This applies
to all
companies irrespective of their size. Therein lies the prejudice. In
Commissioner,
South African Revenue Service v Pieters and Others,[92]
this Court held:
‘The company had
some 700 employees. Their employment contracts were in terms of s
38(1) of the Insolvency Act 24 of 1936 (the Act),
suspended on the
date of the commencement of the winding -up on 7 December 2012. The
contracts came to an automatic end 45 days
later by virtue of the
provisions contained in s 38(9) of the Act. At the time of the
commencement of the company’s
winding-up, leave pay had accrued
to the employees.’[93]
[177]
The fact that the winding-up of Selective was granted by the high
court, without facts supporting that it was insolvent, calls
for the
immediate setting aside of that order. A
provisional winding-up order that is issued by an appellate court, in
the circumstances of this case, should not be countenanced.
It will
not be in accordance with the interests of justice. Besides, the
Commission sought a final order and not a provisional
order before
the high court.
Costs
[178]
There is no basis to depart from the normal rule that the successful
party is entitled to its costs.
[179]
I make the following order:
1
The appeal is upheld with costs, such costs to include costs of two
Counsel, where so
employed.
2
The order of the high court is set aside and substituted with the
following:
‘The
application is dismissed with costs, such costs to include costs of
two counsel, where so employed.’
T
V NORMAN
ACTING
JUDGE OF APPEAL
Appearances
For
the appellant:
M R Maphutha and M Matlala
(The
heads of argument were prepared by T Ngcukaitobi SC and M R Maphutha)
Instructed
by:
Matlala and Associates, Pretoria
Webbers Attorneys,
Bloemfontein
For
the respondent:
H C Janse van Rensburg and P Nyapholi-Motsie
Instructed
by:
The State Attorney, Pretoria
The State Attorney,
Bloemfontein.
[1]
In its heads of argument Selective states that it appeals against
the ‘whole judgment and orders’ granted by the
high
court, but then confined itself to the two issues listed in
paragraph 2 of this judgment. The argument before this Court
however
drifted wider than these two issues. In the high court: Selective
had also raised lis
alibi pendens
as a point in
limine, it
also sought leave to file a supplementary answering affidavit;
and the Commission applied for certain allegations
in Selective’s
answering affidavit, describing certain conduct as ‘disingenuous’,
that the deponent ‘verily
believe[s]’, and that the
application was motivated by racism or an attempt to discriminate
against it because it is black
owned, to be struck out. Selective’s
lis
alibi pendens defence
and its application for leave to file a supplementary answering
affidavit were dismissed. The Commission’s applications
to
strike out were granted. These rulings have not been attacked in
Selective’s heads of argument, did not feature during
argument
before this Court, and are accordingly not considered in this
judgment.
[2]
The issues in the high court, according to a joint practice notice
filed, were: whether the Commission had complied with the
provisions
of s 81(1)(f)(i)
and (ii) of the 2008 Act and was entitled to a winding-up order in
terms of the provisions, alternatively, whether as regulator
it was
entitled in terms of s 344(h)
of the
Companies Act 61 of 1973 (the 1973 Act) as read together with the
Companies Act 71 of 2008, it was entitled to an order that Selective
be wound up on the ground that it is just and equitable to do so.
[3]
Selective has not disputed that it has not maintained a proper
security register of shareholders for an extended period. As a
result, its shareholders could not trade in their shares. The
identities of its shareholders accordingly remain a matter of some
uncertainty.
[4]
Section 186(1) provides:
‘(1) The
objectives of the Commission are –
(a) the efficient
and effective registration of –
(i) companies, and
external companies, in terms of this Act;
(ii) other juristic
persons, in terms of any applicable legislation referred to in
Schedule 4; and
(iii) intellectual
property rights, in terms of any relevant legislation;
(b) the
maintenance of accurate, up-to-date and relevant information
concerning companies, foreign companies and other juristic persons
contemplated in subsection (1)(a)(ii), and concerning
intellectual property rights, and the provision of that information
to the public and to other organs of
state;
(c) the promotion
of education and awareness of company and intellectual property
laws, and related matters;
(d) the promotion
of compliance with this Act, and any other applicable legislation;
and
(e)
the efficient, effective and widest possible enforcement of this
Act, and any other legislation listed in Schedule 4.
(2) To achieve its
objectives, the Commission may –
(a) have regard
to international developments in the field of company and
intellectual property law; or
(b)
consult any person, organisation or institution with regard to any
matter.’
[5]
The ‘other legislation’ listed in schedule 4 is not
directly relevant to this judgment but include, for example also,
Part A of chapter 4 of the Consumer Protection Act, 2008 (Act 68 of
2008).
[6]
Section 187(1) to (4) provide:
‘(1) In this
section, ‘this Act’ has the meaning set out in section 1,
but also includes any legislation listed in Schedule
4.
(2) Other than
with respect to matters within the jurisdiction of the Takeover
Regulation Panel, the Commission must enforce
this Act, by, among
other things –
(a) promoting
voluntary resolution of disputes arising in terms of this Act
between a company on the one hand and a shareholder or
director on
the other, as contemplated in Part C of Chapter 7, without
intervening in, or adjudicating any such dispute;
(b)
monitoring proper compliance with this Act;
(c) receiving
or initiating complaints concerning alleged contraventions of this
Act, evaluating those complaints, and initiating
investigations into
complaints;
(d) receiving
directions from the Minister in terms of section 190, concerning
investigations to be conducted into alleged contraventions
of this
Act, or other circumstances, and conducting any such investigation;
(e)
ensuring that contraventions of this Act are promptly and
properly investigated;
(f)
negotiating and concluding undertakings and consent orders
contemplated in section 169(1)(b) and 173;
(g) issuing
and enforcing compliance notices;
(h)
referring alleged offences in terms of this Act to the National
Prosecuting Authority; and
(i) referring
matters to a court, and appearing before the court or the Companies
Tribunal, as permitted or required by
this Act.
(3) The Commission
must promote the reliability of financial statements by, among other
things-
(a) monitoring
patterns of compliance with, and contraventions of, financial
reporting standards; and
(b) making
recommendations to the Council for amendments to financial reporting
standards, to secure better reliability
and compliance.
(a)
establish and maintain in the prescribed manner and form –
(ii) any other register
contemplated in this Act, or in any other legislation that assigns a
registry function to the Commission;
(b) receive
and deposit in the registry any documents required to be filed in
terms of this Act;
(c) make
the information in those registers efficiently and effectively
available to the public, and to other organs of
state;
(d) register
and deregister companies, directors, business names and intellectual
property rights, in accordance
with relevant legislation; and
(e) perform
any related functions assigned to it by legislation, or reasonably
necessary to carry out its assigned
registry functions.’
[7]
Section 24(4) provides:
‘(4) In addition
to the requirements of subsection (3), every company must maintain –
(a) a securities
register or its equivalent, as required by section 50, in the case
of a profit company, or a member’s register in
the case of a
non-profit company that has members; and
(b)
the records required in terms of section 85, if that section applies
to the company.’
[8]
Section 50 provides:
(a) establish
or cause to be established a register of its issued securities in
the prescribed form; and
(b) maintain
its securities register in accordance with the prescribed standards.
(2) As soon as
practicable after issuing any securities a company must enter or
cause to be entered in its securities register,
in respect of every
class of securities that it has issued –
(a) the
total number of those securities that are held in uncertificated
form; and
(b) with
respect to certificated securities-
(i)
the names and addresses of the persons to whom the securities were
issued;
(ii)
the number of securities issued to each of them;
(iii) the number
of, and prescribed circumstances relating to, any securities-
(aa) that have
been placed in trust as contemplated in section 40 (6)(d); or
(bb) whose
transfer has been restricted;
(iv) in the
case of securities contemplated in section 43 –
(aa) the
number of those securities issued and outstanding; and
(bb) the
names and addresses of the registered owner of the security and any
holders of a beneficial interest in the security;
and
(v) any
other prescribed information.
(3) If a company has
issued uncertificated securities, or has issued securities that have
ceased to be certificated, as contemplated
in section 49(5), a
record must be administered and maintained by a participant or
central securities depository in the prescribed
form, as the
company’s uncertificated securities register, which –
(a) forms
part of that company’s securities register; and
(b) must
contain, with respect to all securities contemplated in this
subsection, any details-
(i) referred
to in subsection (2)(b), read with the changes required by
the context; or
(ii) determined
by the rules of the central securities depository.
(3A)(a) A
company that does not fall within the meaning of an ‘affected
company’ must record in its securities register prescribed
information regarding the natural persons who are the beneficial
owners of the company, in the prescribed form, and must ensure
that
this information is updated within the prescribed period after any
changes in beneficial ownership have occurred.
(b) The
prescribed requirements referred to in paragraph (a) must
be prescribed after consultation with the Minister of Finance and
the Financial Intelligence Centre, established by section
2 of
the Financial Intelligence Centre Act, 2001 (Act
38 of 2001).
(4) A securities
register, or an uncertificated securities register, maintained in
accordance with this Act is sufficient proof
of the facts recorded
in it, in the absence of evidence to the contrary.
(5) Unless all the
shares of a company rank equally for all purposes, the company’s
shares, or each class of shares, and any other
securities, must be
distinguished by an appropriate numbering system.’
[9]
Section 30(1) provides:
‘(1)
Each year, a company must prepare annual financial statements within
six months after the end of its financial year, or such
shorter
period as may be appropriate to provide the required notice of an
annual general meeting in terms of section 61(7).’
[10]
Annual financial statements are of crucial interest to anyone with
an interest in a company – Pinfold
and Others v Edge to Edge Global Investments
Ltd
[2013] ZAKZDHC 52; 2014 (1) SA 206 (KZD) para 11.
[11]
The
annual return must be filed on form CoR 30.1.
[12]
Section 61(7) provides:
‘(7)
A public company must convene an annual general meeting of its
shareholders –
(a)
initially, no more than 18 months after the company’s date of
incorporation; and
(b) thereafter,
once in every calendar year, but no more than 15 months after the
date of the previous annual general meeting,
or within an extended
time allowed by the Companies Tribunal, on good cause shown.’
[13]
Section 214(1)(d)
provides:
‘(1) A person is
guilty of an offence if the person –
.
. .
(d) is a party to
the preparation, approval, dissemination or publication of a
prospectus or a written statement contemplated in section
101, that
contains an ‘untrue statement’ as defined and described in section
95.’
[14]
Section
22(1) provides:
‘(1) A
company must not carry on its business recklessly, with gross
negligence, with intent to defraud any person or for any
fraudulent
purpose.’
[15]
Section
22(2) reads:
‘(2)
If the Commission has reasonable grounds to believe that a company
is engaging in conduct prohibited by subsection (1), or
is unable to
pay its debts as they become due and payable in the normal course of
business, the Commission may issue a notice
to the company to show
cause why the company should be permitted to continue carrying on
its business, or to trade, as the case
may be.’
[16]
Section
22(3) reads:
‘(3)
If a company to whom a notice has been issued in terms of subsection
(2) fails within 20 business days to satisfy the Commission
that it
is not engaging in conduct prohibited by subsection (1), or that it
is able to pay its debts as they become due and payable
in the
normal course of business, the Commission may issue a compliance
notice to the company requiring it to cease carrying
on its business
or trading, as the case may be.’
[17]
Section
171(1) and (2) provide:
‘(1) Subject to
subsection (3), the Commission, or the Executive Director of the
Panel, may issue a compliance notice in the prescribed
form to any
person whom the Commission or Executive Director, as the case may
be, on reasonable grounds believes –
(a) has
contravened this Act; or
(b) assented
to, was implicated in, or directly or indirectly benefited from, a
contravention of this Act,
unless
the alleged contravention could otherwise be addressed in terms of
this Act by an application to a court or to the Companies
Tribunal.
(2) A compliance notice
may require the person to whom it is addressed to –
(a) cease,
correct or reverse any action in contravention of this Act;
(b) take any
action required by this Act;
(c) restore
assets or their value to a company or any other person;
(d) provide
a community service, in the case of a notice issued by the
Commission; or
(e) take any
other steps reasonably related to the contravention and designed to
rectify its effect.’
[18]
Section 171(6) reads:
‘(6)
If the requirements of a compliance notice issued in terms of
subsection (1) have been satisfied, the Commission or the Executive
Director, as the case may be, must issue a compliance certificate.’
[19]
Section
171(5) provides:
‘(5)
A compliance notice issued in terms of this section, or any part of
it, remains in force until –
(i) the
Companies Tribunal, or a court upon a review of the notice, in the
case of a notice issued by the Commission;
or
(ii) the
Takeover Special Committee, or a court upon a review of the notice,
in the case of a notice issued by
the Executive Director; or
(b) the
Commission, or Executive Director, as the case may be, issues a
compliance certificate contemplated in subsection
(6).’
[20]
If a compliance notice is not complied with then the Commission or
Executive Director may apply to court for the imposition of
an
administrative fine or refer the matter to the National Prosecuting
Authority for prosecution as an offence. Section
171(7) reads:
‘(7)
If a person to whom a compliance notice has been issued fails to
comply with the notice, the Commission or the Executive Director,
as
the case may be, may either –
(a) apply to
a court for the imposition of an administrative fine; or
(b) refer
the matter to the National Prosecuting Authority for prosecution as
an offence in terms of section 214 (3),
but
may not do both in respect of any particular compliance notice.’
[21]
The
Financial Services Board, as it was then known, already in December
2011 issued an inspection report. Selective had also reported
a 34%
loss.
[22]
Section 72(4) provides:
‘(4) The Minister,
by regulation, may prescribe –
(a) a category of
companies that must each have a social and ethics committee, if it
is desirable in the public interest, having regard
to –
(iii) the nature and
extent of the activities of such companies;
(b) the functions
to be performed by social and ethics committees required by this
subsection; and
(c)
rules governing the composition and conduct of social and ethics
committees.’
[23]
Section 73(6) provides:
‘(6) A company
must keep minutes of the meetings of the board, and any of its
committees, and include in the minutes
(a) any
declaration given by notice or made by a director as required by
section 75; and
(b) every
resolution adopted by the board.’
[24]
Section 86(4) provides:
‘(4)
Within 60 business days after a vacancy arises in the office of
company secretary, the board must fill the vacancy by appointing
a
person whom the directors consider to have the requisite knowledge
and experience.’
[25]
Section 94(6) provides:
‘(6)
The board of a company contemplated in section 84(1) must appoint a
person to fill any vacancy on the audit committee within
40 business
days after the vacancy arises.’
[26]
Section 108(6) provides:
‘(6)
If the circumstances contemplated in subsection (2) have not been
realised within 40 business days after the issue of the
prospectus,
all amounts received from applicants must be repaid to them promptly
without interest.’
[27]
Being conduct prohibited by s 22(1).
[28]
The second judgment asserts that the high court ignored that
Selective did not remain supine when it was served with notices
and
in some instances asked for support and guidance from the
Commission, that the Commission did not tell it that it could not
give it guidance or support, and that it is part of its
responsibilities to do so. That respectfully, is not so. The
evidence
revealed that Selective adopted a supine approach. On its
own version, it deliberately set its mind against responding to some
of the notices. It never, if it had complied fully and timeously
with any of the demands raised, took steps to obtain compliance
certificates. But more fundamentally, it ignored its own
responsibilities in law to ensure compliance with what any
reasonable
business person would understand is required, namely the
timeous preparation of, for example, audited annual financial
statements,
maintaining a securities register, preparing minutes of
annual general meetings, and the like. It is not the responsibility
of
the Commission in law, to attend to these or to ‘support’
the preparation thereof. No ‘guidance’
from the
Commission is required for Selective to prepare annual financial
statements, hold annual general meetings and maintain
an up-to-date
share register. What the scheme of the Act makes clear is that these
basic responsibilities cannot be shirked by
blaming the Commission.
[29]
Minister
of Land Affairs and Agriculture and Others v D & F Wevell Trust
and others
2008 (2) SA 184 (SCA) at para 43, approved by the Constitutional
Court in Genesis
Medical Aid Scheme v Registrar, Medical Schemes and Another
2017 (6) SA 1 (CC) at para 171.
[30]
According to the 2017/2018 annual report Mr Maja appears to still be
the person mainly charged with the administration of Selective,
and
its only executive director, the other four being non-executive
directors.
[33]
Recycling
& Economic Development Initiative of South Africa NPC v Minister
of Environmental Affairs 2019
(3) SA 251 (SCA) para 129.
[34]
Boschpoort
Ondernemings (Pty) Ltd v ABSA Bank Ltd 20214
(2) SA 518 (SCA) para 19.
[35]
That is Part G of Chapter 2 of the Act. It comprises sections 79 to
83 of the Act.
[36]
Item
9 of Schedule 5 is set out in paragraph 29 below.
[37]
These five categories were recognised in, for example, Rand
Air (Pty) Ltd v Ray Bester Investments (Pty) Ltd 1985
(2) SA 345 (W) (Rand
Air)
at 350A-H.
[39]
Rand
Air fn
30 above at 349F.
[43]
Trencon
Construction v Industrial Development Corporation 2015
(5) SA 245 (CC) para 51 and 52.
[44]
The judgment recorded that despite Selective having claimed that all
audited statements had been filed and uploaded on case lines
no such
documents were before the court. The issue is however not whether
they were uploaded on case lines. They need to be introduced
by
affidavit, and insofar as the proposed supplementary affidavit might
have purported to do so, it was disallowed. According
to it, it is
not evidence before the court.
[45]
Part G is contained in Chapter 2 of the Act and includes sections 79
to 83.
[46]
In view of the conclusion to which I have come in this judgment it
is not necessary to consider this conclusion further.
[47]
The relevant part of s 158 is quoted in paragraph 32 above.
[48]
Section 346(3) requires that every application to court shall be
accompanied by a certificate by the Master , issued not more
than
ten days before the date of the application, to the effect that
security has been given for the payment of all fees and
charges
necessary for the prosecution of the winding-up proceedings and the
costs of administering the company in liquidation
until a
provisional liquidator has been appointed. Section 346(4) provides
that before an application for the winding-up of a
company is
presented to a court, a copy thereof shall be lodged with the Master
who may then report to the court.
[51]
It
is not necessary to plead legal conclusions or to label the cause of
action in pleadings – Die
Dros (Pty) Ltd and Another v Telefon Beverages CC and Others
[2003] 1 All SA (C) para 28 confirmed in Van
Heerden v Bronkhorst 2020
JDR 2363 (SCA) para 26.
[52]
Under the 1973 Act, the Minister could bring such an application. It
has however been suggested that the Minister would not qualify
as a
person under the Act – see Recycling
and Economic Development Initiative of South Africa v Minister of
Environmental Affairs; Kusaga Taka Consulting (Pty)
Ltd v Minister
of Environmental Affairs
[2019] ZASCA 1; [2019] 2 All SA 1 (SCA); 2019 (3) SA 251 (SCA) paras
121-131. The Commission however is a ‘person’. A
‘person’ is defined in s 1 of the Act to
include a
juristic person. Over and above its ordinary common law meaning, a
‘juristic person’ is given an extended
meaning. Section
185 establishes the Commission as a juristic person. The Minister
had the power to bring applications for the
liquidation of companies
under the 1973 Act. The Minister under the Act reports matters for
investigation to the Commission.
The legislature, having regard to
the text, context and purpose of the Act, would not have left a
lacuna that where following
investigations a case exists for the
liquidation of a company that has flouted the requirements of the
Act and is or may be insolvent,
and has not established, despite
being required by the Act to address the issue in a particular
manner, that it is not trading
in insolvent circumstances, that it
cannot be liquidated at the instance of the Commission. To the
extent that there may be any
ambiguity in this regard, the
provisions of s 158(b)(ii)
will find application as best promoting the spirit and purpose of
the Act and best improving the realisation and enjoyment
of rights,
including the rights of the general public to be protected against
public companies who conduct themselves thus.
[53]
There are no such reference in the case of subparagraphs (a),
applications by the company, (b)
in the
case of business rescue practitioners, or (e)
applications by a shareholder where directors or other persons in
control of the company acted in a fraudulent or otherwise illegal
manner or the company’s assets are misplaced or wasted; and
(f)
relating to applications by the Commission.
[54]
Independent
Institute of Education (Pty) Ltd v KZN Law Society
2020 (2) SA 325 (CC) para 38.
[55]
Not expressly referred to in the Act.
[56]
In Ferreira
v Levin NO and Others; Vryenhoek and Others v Powell NO and Others
[1995]
ZACC 13; 1996 (1) SA 984 (CC); 1996 (1) BCLR 1, the Constitutional
Court set out the criteria for evaluating whether an applicant
should be given leave to act in the ‘public
interest’.
In the context of the matter before this Court, the evaluation
includes considering: (i) the nature of the allegations
advanced as
to why the public interest is implicated; (ii) the relevant
provisions of the Act, which provide the context of the
allegations;
(iii) the provisions of the Act for addressing such allegations;
(iv) whether there are other reasonable and effective
ways in which
the challenge may be brought; and (v) the range of persons or groups
who may be directly or indirectly affected
by any order of the court
and the opportunity that those persons or groups have had to present
evidence and argument to the court.
[57]
Just as an application for a deviation in terms of s 105 of the Tax
Administration Act may be brought in the same application that other
substantive relief is claimed in a tax appeal, as opposed to it
being claimed in
a separate application – see United
Manganese of Kalahari (Pty) Ltd v Commissioner for SARS
and four other cases [2025] ZACC 2 para 64.
[59]
Provincial
Building Society of South Africa v Du Bois 1966
(3) SA 76 (W)
(Provincial
Building Society);
Prudential
Shippers SA Ltd v Tempest Clothing Co Ltd and Others 1976
(2) SA 856
(W) at 867
A-C; Erasmus v Pentamed
Investments (Pty) Ltd 1982
(1) SA 178 (W); Wackrill
v Sandton International Removals (Pty) Ltd and Others 1984
(1) SA 282 (W) at 285G.
[60]
Provincial
Building Society fn
44 above at 80B-F.
[65]
The second judgment refers to what is said to have a huge bearing on
the outcome reached by the high court, namely a reliance
by it that
‘[d]espite claiming in the supplementary affidavit that all
audited financial statements had been filed and
uploaded on case
lines no such documents are before court. The only audited financial
statements before court are those for the
2018 financial year’.
No adverse credibility finding was made based on this statement. It
simply confirms what was
the true evidentiary material before the
court, namely that contained in the affidavits. Even if financial
statements had been
uploaded on to case lines, they would, in the
absence of some agreement as to their evidentiary status, have had
no evidentiary
value whatsoever. The supplementary affidavit has not
been considered in preparing this judgment at all.
[67]
Where a finding is made and reported by a regulator charged with the
administration of certain provisions that it is expedient
in the
public interest that a company should be wound up, the fact that the
regulator has reached such a conclusion is certain
a factor, without
it being decisive, that ought to be given weight by the court.
Compare Re
Luben, Rosen and Associates Ltd
[1975] 1 WLR. 122; [1975] 1 All ER 577 (Ch) at 582.
[68]
Mncwabe
v President of the Republic of South Africa and Others; Mathenjwa v
President of the Republic of South Africa and Others
[2023]
(11) BCLR 1342 (CC); 2024 (1) SACR 447 (CC) (Mncwabe)
para 42. See also Hulisani
Viccel Sithangu v Capricon District Municipality (593/2022)
[2023] ZASCA 151 (14 November 2023) para 18 where this Court applied
the functus
officio
principle and stated inter alia ‘[t]his Court held that it was
not open for the high court to revisit the point it had
dismissed
earlier, as in relation thereto, it had become functus
officio
and that its second order undermined the principle of finality of
litigation’. Quoting Thobejane
and Others v Premier of the Limpopo Province and Another [2020]
ZASCA 176 para 6.
[69]
Ibid
Mncwabe
para
42
[71]
Refer to Plascon
Evans Paints Ltd v Van Riebeek Paints (Pty) Ltd [1984] ZASCA 51; 1984
(3) SA 623 (A), which clarifies the rule in Stellenbosch
Farmers’ Winery Ltd v Stellenvale Winery (Pty) Ltd
1957 (4) SA 234 (C).
[73]
See Kalil
v Decotex (Pty) Ltd and Another 1988
(1) SA 943 (A) 979 at 979B where the court observed that ‘prima
facie case’
entails that the balance of probabilities on all affidavits favour
the making of provisional sequestration or liquidation
order. See
also Afgri
Operations Limited v Hamba Fleet (Pty) Limited [2017]
ZASCA 24;
2022
(1) SA 91 (SCA) para 9; Valerio
Engineering CC v Designatech (Pty) Ltd para
18. See further E Bertelsmann et
al Mars:
The Law of Insolvency 10
ed (2019) at 125.
[74]
Lancelot
Stellenbosch Mountain Retreat (Pty) Ltd v Gore NO
and Others [2015] ZASCA 37; [2015] JOL 33031 (SCA).
[76]
Boschpoort
Onderneming (Pty) Ltd v Absa Bank Ltd
[2013] ZASCA 173; [2014] 1 All SA 507 (SCA); 2014 (2) SA 518 (SCA).
[78]
‘A company may be wound up by the Court if –
(a) the company
has by special resolution resolved that it be wound up by the Court;
(b) the company
commenced business before the Registrar certified that it was
entitled to commence business;
(c) the company
has not commenced its business within a year from its incorporation,
or has suspended it
business for a whole
year;
(d) in the case
of a public company, the number of members has been reduced below
seven;
(e) seventy-five
per cent of the issued share capital of the company has been lost or
has become useless for the
business of the company;
(f) the company
is unable to pay its debts as described in section 345;
(g) in the case
of an external company, that company is dissolved in the country in
which it has been incorporated,
or has ceased to carry
on business or is carrying on business only for the purpose of
winding up its affairs;
(h) it appears to
the Court that it is just and equitable that the company should be
wound up.’
[80]
Bato
Star Fishing (Pty) Ltd v Minister of Environmental Affairs and
Tourism and Others [2004]
ZACC 15; 2004 (4) SA 490 (CC); 2004 (7) BCLR 687 (CC).
[83]
The provisions of s 186 (1)(c)
and (d)
are set out fully in the first judgment at paragraph 5 fn 3.
[84]
Recycling
and Economic Development Initiative of South Africa NPC v Minister
of Environmental Affairs; Kusaga Taka Consulting
(Pty) Ltd v
Minister of Environmental Affairs [2019]
ZASCA 1; [2019] 2 All SA 1 (SCA); 2019 (3) SA 251 (SCA).
[86]
Item 9 of Schedule 5 reads:
‘(1)
Despite the repeal of the previous Act, until the date determined in
terms of sub-item (4), Chapter 14 of that Act continues
to apply
with respect to the winding-up and liquidation of companies under
this Act, as if that Act had not been repealed subject
to sub- item
(2) and (3).
(2)
Despite sub-item (1), sections 343,344,346 and 348 to 353 do not
apply to the winding- up of a solvent company, except to
the extent
necessary to give full effect to the provisions of Part G of Chapter
2.
(3)
If there is a conflict between a provision of the previous Act that
continues to apply in terms of sub-item (1), and a provision
of Part
G of Chapter 2 of this Act with respect to a solvent company, the
provisions of this Act prevail.
(4)
The Minister, by notice in the Gazette, may –
(a) determine a
date on which this item ceases to have effect, but bo such notice
may be given until the Minister
is satisfied that
alternative legislation has been brought into force adequately
providing for the winding- up
and liquidation of
insolvent companies; and
(b) prescribe
ancillary rules as may be necessary to provide for the efficient
transition from the provisions of the
repealed Act to the
provisions of the alternative legislation contemplated in paragraph
(a).’
[88]
Absa
Bank Ltd v Naude NO and Others
[2015] ZASCA 97; 2016 (6) SA 540 (SCA).
[92]
Commissioner
for the South African Revenue Service v Pieters and Others
[2018] ZASCA 128; 2020 (1) SA 22 (SCA); 82 SATC 12.
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