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2024
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[2024] ZAECQBHC 74
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Besso Investments (Pty) Ltd and Others v Capeco Development (Pty) Ltd and Others (3812/2024) [2024] ZAECQBHC 74; [2025] 1 All SA 622 (ECP) (28 November 2024)
IN THE HIGH COURT OF
SOUTH AFRICA
(EASTERN CAPE
DIVISION, GQEBERHA)
CASE NO: 3812/2024
(1) REPORTABLE: YES/NO
(2) OF INTEREST TO
OTHER JUDGES: YES/NO
(3) REVISED.
DATE:
SIGNATURE:
In the matter between:
BESSO
INVESTMENTS (PTY)
LTD
First Applicant
SCARLETT
IBIS INVESTMENTS 286 (PTY) LTD
Second Applicant
DE
VLEI PROPERTY DEVELOPMENT
Third Applicant
and
CAPECO
DEVELOPMENT (PTY) LTD
First Respondent
PATRICK
VINCENT
BOUTENS
Second Respondent
NOKUTHULA
TANA
Third Respondent
HENDRY
JOHN
TARR
Fourth Respondent
JUDGMENT
POTGIETER
J
INTRODUCTION
[1]
This is an opposed urgent
application in terms of section 61(12)
[1]
of the Companies Act
[2]
(the Act) for an order
requiring the board of directors of the first respondent (Capeco) to
convene a meeting of shareholders to
consider a motion to remove the
third and fourth respondents as directors. The crisp question is:
what are the requirements for
a statutorily compliant notice calling
a shareholders’ meeting pursuant to a demand in terms of
section 61(3) of the Act.
More specifically whether the affected
directors are entitled to be provided with the reasons or grounds for
their proposed removal.
[2]
The applicants are the shareholders of Capeco and the second to
fourth
respondents its incumbent directors.
[3]
Mr Richards appeared on behalf of the applicants and Mr Nepgen on
behalf
of the third and fourth respondents (‘the respondents’).
[4]
The issue of urgency is in dispute and will be disposed of
in
limine.
It is, however, convenient at the outset to record the
relevant background which is largely common cause.
THE
RELEVANT BACKGROUND
[5]
The first respondent was registered in 1969 under the name
Wonderwonings
Eiendomme (Pty) Ltd. Its name was subsequently changed
to Capeco Development (Pty) Ltd. It has continuously since
registration
conducted the business of investment in and development
of immovable property. It owns a substantial property portfolio.
[6]
The applicants are South African companies each holding a one third
share
of the total issued share capital of Capeco. Each of the
applicants is wholly owned by a company registered in Europe, being
Calo
Investments, Fivanco and Service Partners respectively. Each one
of the holding companies in turn is wholly owned by permanent
residents of Europe (who are the ultimate beneficial owners of
Capeco). In the case of Calo Investments it is the second respondent
(‘Boutens’); in the case of Fivanco it is David van
Biervliet (‘David’); and in the case of Service Partners
it is Robert Baeyens (Robert) and his wife. The applicants acquired
their respective interests in Capeco approximately 15 years
ago and
from time to time elected and appointed its directors primarily from
the ranks of the existing employees of the company.
As indicated, its
board is constituted by the second to fourth respondents. The third
and fourth respondents are resident in Gqeberha
and are also employed
by Capeco in administrative capacities. Boutens, the second
respondent, who is resident overseas was elected
as a director during
mid-2023.
[7]
The role of general manager of the business of Capeco was fulfilled
for
some time by John Baeyens (who is the son of one of the ultimate
owners, Robert) as a consultant and not an employee. The management
of Capeco was historically conducted relatively informally, by means
of consultation between the directors and the ultimate owners,
to
ensure consensus on strategic and important operational decisions.
The relationship between the ultimate owners (and thus the
applicants) and John Baeyens (Baeyens), however, deteriorated over
time resulting in the contractual basis for Baeyens’ role
being
terminated during June 2023. It is common cause that Baeyens’
involvement in Capeco continued regardless. The issue
is the effect
of his continued involvement on Capeco. According to the applicants
the conduct of Baeyens was prejudicial to Capeco,
while the
respondents contend that his role was beneficial. The details in this
regard are set out in the section on urgency below.
For commercial
reasons, the applicants decided against engaging in an adversarial
relationship with Baeyens. The applicants nonetheless
took steps to
strengthen the board of Capeco by appointing Boutens as a director
and also considered the eventual removal and replacement
of the third
and fourth respondents as directors.
[8]
It is also of note that the board of each one of the applicants
consisted
in each case of the third respondent and the relevant
ultimate owner. In order to proceed with the possible removal of the
third
and fourth respondents as directors of Capeco, the attorneys of
record of the applicants approached the third respondent seeking
her
agreement to resolutions providing for the appointment in terms of
section 58 of the Act, of the ultimate owners as the proxies
of the
applicants for the purposes of a shareholders’ meeting.
Although the third respondent indicated that she will attend
thereto,
Baeyens intervened and this never happened as more fully set out
below. To avoid a deadlock between the two directors
on their
respective boards (being the third respondent and the relevant
ultimate owner), the applicants appointed Mark Stewart,
the deponent
to the founding affidavit, as an additional director to their
respective boards and also appointed Stewart as the
proxy of each one
of the applicants. Pursuant to resolutions to that effect, Stewart
issued a demand dated 1 August 2024 (which
was delivered on 5 August
2024) on behalf of each of the applicants in terms of section 61(3)
of the Act for the board of Capeco
to call a shareholders’
meeting for the purposes
, inter alia,
of considering a
resolution in terms of section 71(1) of the Act to remove the third
and fourth respondents as directors. After
a prolonged exchange of
correspondence between the respective attorneys of record of the
parties, as more fully set out below,
and an extensive list of
documents having been furnished to the respondents by the applicants,
it is now common cause that the
respondents have a duty to convene
the meeting. Their position, however, is that they are not obliged to
do so until the applicants
provide them with comprehensive reasons or
grounds for their removal. They contend that the reasons provided by
the applicants
are inadequate and fail to comply with the relevant
statutory requirements. I deal with these issues more fully
below.
[9]
In the circumstances the applicants initially resolved to launch the
present
application in the normal course. Subsequent information that
came to their attention, however, necessitated the application to
be
brought urgently. It is necessary to revert to the issue of urgency.
URGENCY
Legal
requirements
[10]
It is trite that Uniform
Rule 6(12) empowers the court to authorise a departure from the
requirements of Rule 6(5) in matters of
urgency and to allow the
matter to be disposed of on an expedited basis. The applicable
principles are equally trite and do not
warrant repetition save that
the applicant is required to comply as far as practicable with the
existing rules and must set forth
explicitly the circumstances which
are averred render the matter urgent and the reasons why substantial
redress cannot be obtained
at a hearing in due course. It is not open
to the applicant to rely on self-created urgency resulting from a
failure to act expeditiously.
Where, however, an applicant undertakes
genuine efforts to resolve the issue and thereby avoid litigation,
this would not be regarded
as dilatoriness if such efforts fail
[3]
.
It is convenient to deal with the case of the respondents first.
Respondents’
case
[11]
The respondents contend that the applicants failed to demonstrate
urgency and that any
urgency was self-created. They indicate that the
application was issued on 30 September 2024 and was electronically
served on their
attorneys of record on the same day. The notice of
motion provided for entry of opposition by 16:30 on 2 October 2024
and for answering
affidavits to be filed by 16:30 on 4 October 2024.
The matter was set down for hearing on 8 October 2024 and was by
agreement postponed
to 10 October 2024 when the application was
heard. According to the respondents the curtailment of the normal
time periods was
extreme and prejudicial in that it drastically
limited their opportunity to consider the matter and to respond. The
meeting of
shareholders was demanded on 5 August 2024. The
applicants’ attorneys, Rushmere Noach Incorporated (‘RNI’),
indicated
on 19 August 2024 that they had instructions to proceed in
terms of section 61(12) of the Act to compel the Capeco board to
convene
the meeting. On 11 September 2024 RNI threatened to bring the
application if notice of the meeting was not provided by 13 September
2024. When no meeting materialised, RNI repeated the threat on 16
September 2024 to litigate if notice of the meeting was not given
by
18 September 2024. The application was only brought some two weeks
later on extremely short notice. Moreover, the factual basis
for
urgency stemmed from the alleged involvement and improper control and
influence exercised by Baeyens over Capeco which, on
the applicants’
own version, occurred since June 2023.
[12]
The respondents furthermore contend that another fundamental reason
why the matter is not
urgent, is that the shareholders themselves are
entitled to have called the shareholders’ meeting. They
indicate that on
the applicants’ case Capeco’s board of
directors was not effective. Firstly, because the third and fourth
respondents
do not exercise their functions as directors
independently of Baeyens and further because the second respondent is
willing to convene
a meeting but cannot do so without the agreement
and co-operation of the third and fourth respondents. The directors
are effectively
‘
deadlocked’.
It is generally
accepted in our law that if for some reason directors cannot or will
not exercise powers vested in them, the general
meeting of
shareholders has inherent power to exercise the powers in question.
The applicants are therefore entitled to and ought
to have called the
shareholders’ meeting themselves.
[13]
In support of the above contention, Mr Nepgen submitted that on a
proper interpretation
the Act and Capeco’s memorandum of
incorporation as well as its shareholders’ agreement, all
recognise that the shareholders
can call the meeting. Section 61(3)
of the Act provides that the board of a company ‘
or any
other person specified in the company’s Memorandum of
Incorporation’
must call a shareholders’ meeting upon
delivery of a written and signed demand. The memorandum of
incorporation provides as
follows in clause 4.2:
Shareholders’
right to requisition a meeting
The
rights of Shareholders
to
requisition
a meeting, as set out in section 61(3), may be exercised by the
holders of at least 10% of the voting rights entitled to be exercised
in relation to the matter to be considered at the meeting, subject to
the demands from the Shareholders to call a meeting being
a signed
written demand describing a specific purpose for which the meeting is
proposed.
(emphasis added)
Section 7.2 of the
shareholders’ agreement states (
sic
):
Call.
The
Shareholders’ Meetings shall be called by any of the company’s
Directors when convenient or necessary,
or by request of any of
the Shareholders, in the events provided by law
, provided that
such a request shall be accompanied by the considerations that
contained the description of the matters that shall
be discussed and
decided in the respective meeting, as well as indicate all of the
pertinent documentation that could be required
for such discussions.
(emphasis provided by the
respondents)
[14]
Mr Nepgen argued that the shareholders are ‘
any other person
specified in the company’s Memorandum of Incorporation’
as contemplated in section 61(3). He submitted that the term
‘
requisition’
in clause 4.2 of the memorandum of
incorporation refers to the right to call the meeting and not only
the right to demand the meeting.
This is evidenced by the reference
to both a ‘
requisition’
and a ‘
demand’
in clause 4.2 which must have different meanings and cannot both
refer to the right to demand a meeting. The meaning of the term
‘
requisition’
in the memorandum of incorporation
is put beyond doubt, so the argument continued, if regard is had to
clause 5.3.2 thereof which
provides that: ‘
The right of the
Company’s Directors
to requisition
a
meeting of the Board, as set out in section 73(1), may be exercised
by at least 25% of the Directors, in the case of the Board
having 12
or more members, or 2 Directors in any other case.’
(emphasis provided by the respondents).
[15]
It goes without saying, so the argument ran, that there is no urgency
and that the notice
to convene a shareholders’ meeting can be
issued by the applicants themselves. The application therefore ought
to be struck
from the roll for lack of urgency.
Applicants’ case
[16]
Mr Richards submitted that although RNI alluded in the exchange of
correspondence to an
application in terms of section 61(12), it was
never envisaged prior to 29 September 2024 to bring the application
as a matter
of urgency. Prior to the latter date, the applicants
intended to bring the application in the ordinary course. It was only
after
the information provided by Ms Holmes on 29 September 2024 came
to the attention of the applicants, that they had clear reason to
believe that the third and fourth respondents (under the influence of
Baeyens) were engaging in conduct that was detrimental to
Capeco.
While the respondents denied some of the information provided by Ms
Holmes, they have not denied the assertions concerning
the signature
and backdating of leases entrenching the interests of Baeyens but
contend that they did not in any way act unlawfully.
By signing the
documents referred to, the respondents have ignored the need for
formal resolutions of directors or at the very
least of notification
to Boutens as the third director. This demonstrates, according to the
argument, the need for a shareholders’
meeting to be convened
at the earliest opportunity to enable the applicants to consider the
removal of the third and fourth respondents
as directors and the
election of an additional director or directors who are independent
and not subject to the dominance of Baeyens.
There is every prospect
that should the application be brought in the ordinary course, the
respondents would continue to prevaricate
in convening the meeting
and will continue to do the bidding of Baeyens in the interim. In
that event, the applicants would not
be able to obtain substantial
redress at a hearing in due course.
[17]
Mr Richards further
submitted that clause 4.2 of the memorandum of incorporation does not
entitle the applicants to convene a meeting
of shareholders and that
to the extent that clause 7.2 of the shareholders’ agreement
may allow a shareholders’ meeting
to be called by an individual
director it conflicts with the provisions of the memorandum of
incorporation and the Act and is rendered
void by the provisions of
section 15(7)
[4]
of the Act. The matter is
accordingly sufficiently urgent to justify the departure from the
rules of court.
Assessment
[18]
It is readily apparent
that the factual basis for urgency is the information provided by Ms
Holmes on 29 September 2024 to the effect
that Baeyens has
orchestrated certain actions by the respondents to the detriment of
Capeco. Prior to that stage, steps were taken
by the applicants to
avoid the need to bring an application in terms of section 61(12)
which was envisaged would be brought in
the ordinary course. These
steps to resolve the matter do not amount to dilatoriness on the part
of the applicants
[5]
.
The application was in fact launched as a matter of urgency the day
after the relevant information provided by Ms Holmes came
to the
attention of the applicants.
[19]
The respondents dispute much of what Ms Holmes had conveyed to the
applicants. It is not
necessary to finally decide any of the disputes
in this regard in order to adjudicate the merits of the present
application. It
is in fact not desirable to do so given that the
applicants are instituting separate proceedings dealing with the
issues concerning
Baeyens. I accordingly deal with this aspect only
to the extent strictly necessary to decide the issue of urgency.
[20]
It is clear on the available evidence that Baeyens’ involvement
in Capeco continued
even after the contractual basis for his previous
role was terminated. The third respondent confirmed in the answering
affidavit
that she knew that the consulting agreement, forming the
basis for Baeyens’ role in Capeco, was terminated in 2023, but
indicated
that she was never informed that this would have any
influence on how the business of Capeco was to be conducted. She
avers that
Baeyens continued to provide support as before and that
she was never instructed that this had to change. On her version
Baeyens
was a positive influence in Capeco.
[21]
According to the applicants, Baeyens refused to relinquish his
management role in Capeco
after the contractual basis for that role
was terminated. This is the subject of separate litigation. They
indicate that he is
neither a director nor an employee of Capeco and
there is no legal basis for his continued participation in its
business but he
nonetheless continued to exercise control over the
business.
[22]
The evidence overwhelmingly supports the conclusion that Baeyens’
continued role
in Capeco is not constructive. He has clearly
intervened and scuppered the efforts of the applicants to get the
third respondent
to sign the resolutions for the appointment of
proxies for the applicants. He realised that the ultimate goal was
the removal of
his allies, the third and fourth respondents, as
directors. Baeyens obtained access to the applicants’
attorney Mr
Arnold under false pretences on 16 July 2024 (more than
likely with the co-operation of the third respondent) when he
hijacked
a telephone call apparently from the third respondent to Mr
Arnold after Mr Arnold took the call. He informed Mr Arnold that he
and the third respondent were one, that ‘
we will not be
leaving’,
and that the resolution will not be signed. He
purported to represent the third respondent in the discussion. All of
this occurred
after receipt of emails from the third respondent on 16
July 2024 (annexures ‘FA 4-6’) addressed to Mr Arnold
indicating
that she will be attending to the resolutions. She admits
having received the email from Mr Arnold of 17 July 2024 (annexure
‘FA7’)
recording the conversation with Baeyens and
requesting her to confirm whether she instructed Baeyens to represent
her in the discussion.
She never responded nor did she deny Baeyens’
averments. She simply states in the answering affidavit that she
cannot comment
on the conversation of 16 July 2024.
[23]
The account of Ms Holmes concerning the conduct of Baeyens is set out
in some detail in
the founding affidavit and is confirmed in her
confirmatory affidavit. It is apparent that Ms Holmes had a
long-standing involvement
with Capeco. She indicated that Baeyens
maintained absolute control over the affairs of Capeco in a loud,
aggressive and domineering
manner. He has an uncontrollable temper
and the third and fourth respondents are completely under his control
and do anything he
orders them to do for fear of incurring his wrath.
He is a bully and Ms Holmes and other staff members are terrified of
him and
have suffered extreme mental abuse over an extended period at
his hands. If anything occurs which does not meet his approval, he
screams at the subject of his disapproval using foul and obscene
language to the extent that spittle flies from his mouth. Ms Holmes
reported that after the first letters of RNI were sent to the third
respondent concerning the resolutions in respect of proxies
for the
applicants, Baeyens rampaged around the office, asserting that he and
the staff were under attack from the shareholders
and Mr Arnold,
uttering epithets and threats regarding what he would do.
[24]
The third respondent vehemently denies Ms Holmes’ account of
Baeyens’ behaviour
including the rampage at the office, but
admits that Baeyens is a ‘passionate’ person (which in
her view is not a negative
trait) and does recall that Baeyens was
upset with the apparent inaccurate allegations made against him by
RNI. This is rather
peculiar because there is no reference to Baeyens
in the said letters of Mr Arnold to the third respondent and there
were therefore
no inaccurate allegations made against him in those
letters that he could have been upset about. As alluded to, the third
respondent
replied to the letters of Mr Arnold on 16 July 2024
confirming that she will attend to the request to sign resolutions of
the shareholders
to appoint a proxy in terms of section 58(1) of the
Act. To recap, the discussion between Mr Arnold and Baeyens took
place after
the third respondent’s reply of 16 July 2024
confirming that she will sign the resolutions. Baeyens informed Mr
Arnold that
the resolutions will not be signed. Baeyens’
influence over the third respondent is demonstrated by the fact that
the resolutions
were never subsequently signed. This tends to
corroborate the account of Ms Holmes.
[25]
Further corroboration for the account of Ms Holmes can be found in
the exchange of correspondence
between Mr Arnold and the respondents’
attorneys of record which demonstrates Baeyens’ attitude and
conduct. The email
of 13
August 2024 (annexure ‘FA
22’) from Mr Arnold to Joubert Galpin Searle (‘JGS’),
who are the respondents’
attorneys of record, states that:
‘
Lastly, it appears
that all communication to the directors of Capeco, is being
intercepted by one John Baeyens. He also then proceeds
to send a
flurry of incoherent, unsubstantiated and often defamatory emails to
the shareholders of Capeco, their family and their
overseas
attorneys. To the extent that you are able, please impress upon him
to cease and desist from doing so immediately. Neither
of those
parties, nor our offices, have any desire to engage with Mr Baeyens
at this time.’
[26]
In an email of 19
August 2024 (annexure ‘FA 25’)
from Mr Arnold to JGS it is recorded that:
‘
Unfortunately,
however Ms Tana and Mr Tarr have fallen inordinately under the
influence of Mr John Baeyens (“Mr Baeyens”)
(who of
course is not a director of Capeco). In the course of bombarding our
clients and various unrelated third parties with often
incoherent,
defamatory and factually incorrect missives, Mr Baeyens repeatedly
refers to himself, Ms Tana and Mr Tarr by means
of the third person
plural pronoun in relation to the management of the company.
Mr Boutens
[Second
Respondent]
has always been contactable and willing to engage
with the other directors of Capeco. Unfortunately, the negative,
aggressive and
dismissive approach adopted by Mr Baeyens (and his
concomitant influence on Ms Tana and Mr Tarr) has resulted in a
breakdown of
the relationship between our clients (as shareholders)
and Capeco and has also frustrated the relationship between Mr
Boutens and
his fellow directors.
…
It follows also that our
clients share the view of Mr Baeyens (expressed in an email on 15
August 2024 to our clients and 16 other
recipients, in the following
terms “…
hence, again, my deepest request: let’s
divorce. Nobody wants to work with both of you. I’ll pay in for
the divorce”
) that any form of relationship between them
and Mr Baeyens is unworkable.’
[27]
In a letter dated 6 September 2024 (annexure ‘FA 28’)
from Mr Arnold to JGS
it is stated that:
‘
In closing, we
reiterate that Mr Boutens has at all times been willing to interact
with his fellow directors in Capeco. Unfortunately,
such interactions
have frequently been prematurely scuppered by the uninvited and
disruptive presence of Mr Baeyens (who, as we
have previously pointed
out, holds himself out as the representative of Ms Tana and Mr Tarr)
and whose main objective appears to
be to spew a deluge of unhelpful,
irrational and defamatory missives which add no commercial value to
Capeco and serve no purpose
other than to entrench the divide between
him and the shareholders.’
[28]
It is readily apparent from the letter of JGS dated 15 August 2024
(annexure ‘FA24’)
addressed to the ultimate owners of
Capeco, that JGS was also acting on behalf of Mr John Baeyens. The
above references to Baeyens
in the exchange of correspondence between
Mr Arnold and JGS, have nowhere been disputed.
[29]
Finally, in follow up letters dated 26 July 2024 (annexures
‘FA17-19’) addressed
by Mr Arnold to the third respondent
requesting signature of the resolutions of the applicants for the
appointment of proxies,
it is stated that: ‘
Despite having
responded in all three instances to advise that you would “attend
to the matter” you have not done so.
Instead, we have received
a flurry of intemperate correspondence from John Baeyens (who is not
a director or other officer of the
Company nor of either of the other
shareholder companies, or of Capeco) purporting to represent you in
your capacity as director.”
There is no response or denial
on record from the third respondent.
[30]
Needles to say, for present purposes there is no need and it is not
advisable to finally
decide the apparent dispute relating to the
issues concerning Baeyens. As indicated, those issues will no doubt
feature in the
separate proceedings being instituted in that regard
by the applicants and is only relevant to the extent necessary to
determine
the issue of urgency. Suffice it to say that I am satisfied
that the account of Ms Holmes is largely borne out by the available
evidence. This in turn appears to support the applicants’
contention that Baeyens, in conjunction with the respondents, were
acting to the detriment of Capeco justifying the decision to bring
the application as a matter of urgency.
[31]
In my view there is no merit in the submission of Mr Nepgen that the
shareholders can call
the meeting themselves which disposes of the
applicants’ contention that the matter is urgent. There is no
basis for the
submission that Capeco’s board is not effective
or that the directors cannot or will not exercise the powers vested
in them.
The argument advanced in this regard is that the third and
fourth respondents are effectively ‘deadlocked’ with the
second respondent in that the latter is willing to convene the
shareholders’ meeting, while the former are not. In the
circumstances
the general meeting of shareholders therefore has the
inherent power to exercise the powers vested in the board and would
have
the power to convene the meeting and to issue the relevant
notices. This argument is misconceived. There is nothing approaching
a deadlock among the directors. The position is that the third and
fourth respondents, who constitute a majority, is not presently
willing to call the meeting. There is accordingly no basis for the
shareholders to intervene and assume the power of the board
to call a
meeting on the basis that the board is not effective or that the
directors cannot or will not exercise their powers to
call the
meeting. The third and fourth respondents accepted that the directors
are under a duty to call the meeting, but argue
that they are not
obliged to do so until their requirements have been complied with.
The only available avenue for the shareholders
is to seek relief in
terms of section 61(12) of the Act where they disagree with the
position adopted by the third and fourth respondents.
Any meeting
which is unilaterally convened by them to remove the third and fourth
respondents, would be unlawful.
[32]
Furthermore, clause 4.2
of the memorandum of incorporation, on a proper interpretation, does
not empower the shareholders to call
or convene a shareholders’
meeting. The approach to the interpretation of words used in a
document such as the memorandum
of incorporation, is now
well-established. The inevitable point of departure is the language
of the provision. It is the language
used, understood in the relevant
context and having regard to the purpose of the provision that
constitutes the unitary exercise
of interpretation, however, the
triad of text, context and purpose should not be used in a mechanical
fashion.
[6]
[33]
The clause, on its plain
meaning, explicitly gives effect to the right of shareholders, which
is entrenched in section 61(3), to
demand a meeting. The proposition
advanced by Mr Nepgen is fanciful that the word ‘requisition’
in clause 4.2 actually
means call or convene. The ordinary meaning of
the word is clear. It is defined as: ‘
1.
The action of requiring something; a demand; 2. The action or an act
of formally requiring or demanding that a duty etc. be performed;
a
written demand of this nature.’
[7]
The word requisition is
used as a verb in clause 4.2 meaning to demand. The clause records
the right of shareholders to demand that
a shareholders’
meeting be called. Neither the context nor the purpose of the clause
militates against this conclusion. The
fact that clause 4.2 refers to
both a ‘requisition’ and a ‘demand’ is of no
moment in that the words are
synonymous in the context of the clause.
The use of both words in the clause does not signify that they must
have different meanings
as Mr Nepgen submitted. There is no reason
why the drafters of the document would not explicitly have referred
to the right of
shareholders to ‘call’ a meeting if that
was the intention, instead of referring to a right to ‘requisition’
a meeting which is synonymous to demanding a meeting. This is
particularly so given that the clause provides that the ‘
demands
from the Shareholders
to
call
a
meeting’
must
comply with certain stated requirements. It is clear that the latter
is a reference to the right of shareholders to demand
that a meeting
be called. It would be meaningless and absurd to grant the
shareholders the right to demand that a meeting be called,
if the
shareholders themselves can call the meeting. The clause clearly
gives effect to the provisions of section 61(3) which compel
the
board, or another person specified in the memorandum of incorporation
or rules, to call a shareholders’ meeting upon
delivery of a
compliant demand for such meeting. On the plain meaning of clause
4.2, the shareholders are not specified as ‘
any
other person’
authorised
to call a shareholders’ meeting. This conclusion is not
disturbed, as Mr Nepgen contends, by the provisions of
clause 5.3.2
of the memorandum of incorporation which similarly give effect to the
obligation in terms of section 73(1) imposed
on a director,
authorised by the board, to call a board meeting if required by the
stipulated number of directors. The reference
in the clause to the
right ‘
to
requisition’
a
meeting clearly refers to the right of the stipulated number of
directors to ‘
require’
that a board meeting be
held in terms of section 73(1)(i) and (ii)
[8]
.
This is similar to the right of shareholders to demand a
shareholders’ meeting in terms of section 61(3). The
respondents’
reliance on section 7.2 of the shareholders’
agreement is equally misplaced. This provision does not empower
shareholders
to call or convene a shareholders’ meeting. It
provides in terms, that the shareholders’ meeting shall be
called by
any of the directors (not shareholders),
inter
alia,
‘
by
request of any of the shareholders.’
[34]
It follows that there is no merit in the contention that the
applicants could have relied
upon the right of the shareholders to
call a shareholders’ meeting.
[35]
I am accordingly persuaded that the application is sufficiently
urgent to justify the applicants’
non-compliance with the rules
and that the application should be entertained on that basis.
MERITS
The
respondents’ attitude towards the calling of the meeting
[36]
It is common cause that the applicants’ demand in terms of
section 61(3) for a shareholders’
meeting was delivered to each
of the second to fourth respondents (the directors of Capeco) on 5
August 2024. The second respondent
is amenable to the meeting being
held. He is, however, based overseas and has for logistical reasons
requested the third and fourth
respondents, who are also local
employees of Capeco, to attend to calling the meeting. The
respondents are willing to undertake
the task, but argue that they
are presently unable to issue the notice calling the meeting until
all the statutory requirements
have been met. This has resulted in a
protracted exchange of correspondence between RNI and JGS attorneys.
The
exchange of correspondence between the attorneys
[37]
On 15 August 2024 JGS wrote that the respondents were confused by
conflicting communications
from the applicants and would apply
themselves to the demand once the confusion has been alleviated. RNI
responded on the same
day dealing with the apparent confusion. JGS
advised on 20 August 2024 that the respondents were still considering
their position.
On 28 August 2024 JGS requested an extensive list of
documents and indicated that the respondents will assess the
documents upon
receipt thereof and reapply themselves to the demand.
RNI provided the requested documents on 6 September 2024. On 10
September
2024 the respondents adopted a new stance and contended
that the applicants were obliged to provide them with the ‘
grounds
for the advancement of the proposed resolution’
to enable
them to meaningfully ‘
make the legislatively sanctioned
representations.’
They are therefore unable to issue
notices for the meeting. RNI responded on 11 September 2024
indicating that it was not open
to the respondents to refuse to
comply with the demands on the said basis as they appear to be doing.
The letter nonetheless continued:
‘
That notwithstanding, as
we have already advised your clients, our clients uniformly have lost
confidence in the ability of your
clients to carry out their
responsibilities as directors with the necessary dispassion and
independence and in the best interests
of the Company and it is for
that reason that they wish to consider their removal as directors
(subject of course to such presentation
as they may see fit to
make).’
[38]
JGS replied to the following effect on 12 September 2024:
‘
2. We are
nevertheless instructed to respond as follows to certain pertinent
aspects raised in your letter.
2.1 Your clients’
position as regards the calling of the shareholders meeting (“the
meeting”) is unfortunate.
2.2
Our clients
are indeed aware of the peremptory nature of the legislation and
do
not dispute their responsibility to call the meeting. Their basis for
contention is simply that they must be placed in a position
to call
the meeting in a manner which is legislatively compliant
.
2.3 Unfortunately, your
clients have still not enabled our clients to do so.
2.4
In order for a
meeting proper to be called
by the board of directors of the
Company,
the notice convening the meeting is to set out the
grounds for the proposed removal of the directors concerned.
The
rationale for setting out these grounds is to afford the directors
who are the subject of the proposed resolution an opportunity
to
meaningfully respond to the basis for the resolution during their
legislatively sanctioned presentation and prior to the shareholders’
vote being cast. Given that your clients are of the view that this
position is “misconceived”, we regrettably are compelled
to direct you specifically to the authority upon which our clients
rely and which they are of the view applies to the circumstances
of
this matter; namely
Pretorius and Another v Timcke and Others
15479/14 2015 ZAWCHC.
…
2.7 We would like to
reiterate our clients’ assurance of their intention to call the
meeting as soon as they are placed in
a position to do so. …
2.8 In your letter you
aver that your clients have lost confidence in our clients’
ability to carry out their responsibilities
as directors “…
with the necessary dispassion and independence, and in the best
interest of the company”.
This is not (
sic
)
simply not
sufficient for the reasons stated in paragraph 2.4.
2.9
Our clients
request that your clients provide them with sufficient specificity as
to why your clients believe that they are unable
to carry out their
responsibilities as directors with the necessary dispassion and
independence so expected of them.
2.10 Our clients would
appreciate if your clients could perhaps
provide any example of
such deviation from the dispassion and independence which your
clients so require,
bearing in mind that you also act for Mr
Vincent Boutens who himself is a director of the Company. You will
know that that (
sic
) a director who serves on a board of a
company is obligated to act in the best interests of that company and
not in accordance
with the whims of the shareholders. As we have
previously recorded, our clients instruct that Mr Boutens has by no
means discharged
his duty as a director of the Company in a manner
that admits of sensibility, independence and eagerness to advance the
interests
of the Company.
2.11 Be that as it may,
our clients look forward to calling the meeting upon receipt of your
response which they trust will be in
accordance with that set out at
paragraph 2.4 above.’
(emphasis supplied)
[39]
RNI responded as follows on 16 September 2024:
‘
The aforegoing
notwithstanding and despite their firm view that they have no
obligation to go further than they have in indicating
the basis upon
which they wish to consider the resolution to remove them as
directors, our clients are prepared to afford your
clients a final
opportunity to comply with the obligations imposed upon them by the
Companies Act.
Our clients have conveyed
to your clients in the plainest of terms (
inter alia
in our
letter) that your clients no longer enjoy their confidence. Your
clients were elected as directors by the shareholders (which
are our
clients) and serve at their behest and our clients no longer support
them, nor do they have our clients’ trust. We
have referred
previously to the influence of Mr John Baeyens in relation to the
conduct of your clients of their responsibilities
as directors as
being one of the bases which has influenced our clients’
conclusion. Mr Baeyens is not a director (nor for
that matter an
employee) of Capeco.
Whilst it is not
necessary for our clients to provide your clients with any further
detail at all, the influence enjoyed by Mr Baeyens
is amply
illustrated by the contents of the string of intemperate emails sent
by him on 16 July 2024 to the writer (with copies
to Ms Tana and in
some instances to directors in your firm) and the email of 17 July
2024 from Ms Tana to the writer. On the instructions
of our clients,
we responded to the latter on that date and did not receive a
response from her (although Mr Baeyens has consistently
communicated
with us ostensibly on his own behalf and that of both your clients,
using third person plural pronouns).
…
Unless our clients have
received a notice from the directors before 16h30 on 18 September
2024 convening a meeting of shareholders
for the consideration of the
motion previously sent to them, such meeting to be held no later than
a date during the week of 7
to 11 October 2024, our clients will
proceed without further notice to your clients to seek the necessary
relief in the High Court.’
[40]
JGS replied on 19 September 2024 basically reiterating that the
respondents accept their
obligation to call the meeting but have not
been placed in a position by the applicants to do so. The present
application then
followed on 30 September 2024.
The
assessment of the respondents’ case
[41]
The position of the respondents is set out as follows in their heads
of argument:
‘
47. In essence the
respondents contend that statutorily compliant notices cannot be
given or ordered, and thus that the application
is premature for the
following reasons:
47.1 The shareholders
have not provided the directors with a copy of the shareholders’
resolution as contemplated by the Act;
and
47.2 The shareholders
have not provided the directors with sufficient clarity and
specificity accompanied by sufficient information
and/or explanatory
material to enable either a shareholder who is entitled to vote on
the resolution on the one hand, or the directors
on the other hand,
to participate in the proposed meeting and to seek to influence the
outcome of the vote on the resolution, with
the result that any
notice will be deficient of the requisite detail.’
[42]
In addition, Mr Nepgen
submitted firstly with reference to
CDH
Investment NV v Petrotank South Africa (Pty) Ltd & Another
[9]
that the court would
refuse an order under section 61(12) where the applicant itself
enjoys the right to call the meeting. Furthermore,
that courts are
disinclined to interfere in the management of company affairs and
that ‘
a
court would generally, unless special circumstances require
otherwise, have to be satisfied that calling a members’ meeting
was bona fide intended, with a legitimate purpose, and in the best
interests of the company.’
I
am not altogether convinced that the latter considerations do apply.
It is not clear why shareholders should be
bona
fide
or
act in the best interests of the company when they demand a
shareholders’ meeting, because they do not owe fiduciary or
other duties to the company. It is, however, not necessary to express
a final view in this regard. Suffice it to say that I am
satisfied
that there is no basis for finding that the applicants are not acting
in good faith or in the best interests of Capeco
or for a legitimate
purpose.
[43]
I turn to the first issue raised by Mr Nepgen. As indicated above,
the applicants do not
have the right to call the shareholders’
meeting in terms of the memorandum of incorporation of Capeco or
otherwise. In any
event the situation in
Petrotank
was
different in that the applicant in that matter had the support of a
majority of directors who could have passed a board resolution
to
convene a shareholders’ meeting and there was accordingly no
need to enlist the assistance of the court under section
61(12). In
the present matter the applicants require the co-operation of the
respondents (in the absence of a court order) to call
a shareholders’
meeting.
Petrotank
furthermore did not deal with the removal
of directors (that issue was previously resolved) but was concerned
with a situation
where the applicant, who was a majority shareholder,
intended to use the meeting for questionable purposes. One of the
intended
resolutions patently amounted to oppressive conduct against
the minority shareholder. It is clear that the circumstances of
Petrotank
and of the present matter differ materially and that
Petrotank
is distinguishable. The applicants would be left
without any meaningful remedy if they are precluded from resorting to
the mechanism
created by section 61(12).
[44]
It is convenient to deal next with the second leg of the respondents’
argument, namely
that the application is premature because the
applicants have not provided any or sufficient information or
explanatory material
in their demand for the meeting so as to enable
the respondents to issue the notice of the meeting. Put succinctly,
the issue is
whether the respondents are entitled to reasons or the
grounds for their intended removal as directors of Capeco.
[45]
Section 62
[10]
of the Act regulates the
notice requirements for a shareholders’ meeting. In terms of
the provisions of this section, the
company is obliged to deliver a
compliant notice of the meeting to each shareholder, 10 business days
(in the case of Capeco) before
the meeting is to begin. The notice
must be in writing and contain the information set out in section
62(3), which includes the
general purpose of the meeting and any
specific purpose contemplated in section 61(3)(a). It must also
include a copy of the proposed
resolution received by the company
which is to be considered at the meeting.
[46]
Section 65(3) of the Act deals with the case of a resolution proposed
by shareholders and
is applicable to the present matter. It provides
in relevant part that:
‘
Any two
shareholders of a company –
(a) may propose a
resolution concerning any matter in respect of which they are each
entitled to exercise voting rights; and
(b) when proposing the
resolution, may require that the resolution be submitted to
shareholders for consideration –
(i) at a meeting demanded
in terms of section 61(3);’
[47]
The format or requirements for a resolution are set out as follows in
section 65(4):
‘
A proposed
resolution is not subject to the requirements of section 6(4), but
must be –
(a) expressed with
sufficient clarity and specificity; and
(b) accompanied by
sufficient information or explanatory material,
to enable a shareholder
who is entitled to vote on the resolution to determine whether to
participate in the meeting and to seek
to influence the outcome of
the vote on the resolution.’
[48]
Section 71
[11]
deals with the removal of
directors. It is readily apparent from the section that the directors
to be removed must be given notice
of the meeting as well as be
provided with the resolution for their removal. The directors are
entitled to a notice period ‘
at
least equivalent to that which a shareholder is entitled to receive’
.
The company is accordingly obliged to deliver a notice of the
shareholders’ meeting to the directors concerned (the third
and
fourth respondents), in the present case 10 business days before the
commencement of the meeting ie a notice period at least
equivalent to
that which the applicants are entitled to receive in terms of section
62(1)(b) of the Act.
[12]
The
notice must be in writing and must specify the date, time and place
for the meeting and its record date as well as its general
and any
specific purposes. It must include a copy of the proposed resolution
for the removal of the directors concerned.
[49]
The section 61(3)
demand
[13]
delivered to the
directors of Capeco on 5 August 2024 proposed that the shareholders’
meeting be held on Tuesday, 20 August
2024 at 14h00 in Gqeberha. This
made sufficient allowance for a notice period of 10 business days.
The stated specific purpose
of the meeting was to consider
resolutions in terms of section 71(1) to remove the third and fourth
respondents as directors and
further to elect Mark Stewart as a
director of Capeco. In my view, this information was clearly
sufficient to enable the respondents
to prepare a compliant notice of
the proposed meeting and its specific purpose. Nothing further was
expected of the applicants
in so far as the formulation of the notice
was concerned. As more fully set out below, it was specifically not
required of the
applicants that they provide the respondents with a
statement setting out the reasons or grounds for their removal as
directors.
This is unlike the position under section 71(4)(a) that
requires such a statement in the case of the proposed removal of a
director
by the board.
[50]
It is common cause that the applicants have not provided the
respondents with copies of
separately drafted resolutions together
with the demand. Mr Nepgen submitted that the duty to draft the
resolutions rests on the
applicants and that the omission was fatal
to the application. He referred in this regard to the provisions of
section 65(5)(b)(i)
that empower a shareholder or director, who
believes that the form of the resolution does not satisfy the
requirements of section
65(4), to apply to the court for an order
‘
requiring the company, or shareholders who proposed the
resolution, as the case may be, to … take appropriate steps to
alter
the resolution so that it satisfies the requirements of sub-
section (4).’
He contended that this provision supports the
conclusion that where the shareholders demand a meeting they must
draft (and where
applicable alter) the resolution which has to
accompany the notice of the meeting. Although I am not convinced that
this is indeed
the case, I am willing to assume in the respondents’
favour that the contention is correct particularly in the present
circumstances.
In this case the respondents are required to call the
meeting and would otherwise have to draft the resolutions for their
own removal
as directors. It is not difficult to conceive that the
potential for further disputes about the contents of the resolutions
are
real should this task be left in the hands of the respondents.
For pragmatic reasons this prospect should be avoided and I therefore
conclude that in the circumstances of this case (regardless of what
the true intent in this regard might be), the applicants should
be
required to formulate the resolutions. In so far as the requirements
of section 65(4) are concerned, it is to be noted that
all of the
shareholders are demanding the meeting and proposing the resolutions
for the removal of the respondents. They will be
required to
formulate the resolutions themselves. It is inconceivable that they
would require information or explanatory material
not already in
their possession in order to determine whether to participate in the
meeting or to be able to influence the vote
on the resolutions which
they themselves propose. Under these circumstances it is readily
apparent that the information set out
in the demand delivered on 5
August 2024 is sufficient, if incorporated in the resolutions, to
comply with the requirements of
section 65(4)(a) and (b). Needless to
say, the resolutions (which must accompany the notice) have to be
provided to the respondents
before they would be able to give notice
of the meeting.
[51]
I revert to the remaining issue whether the respondents must be
provided with the reasons
or grounds for their proposed removal and
sufficient information or explanatory material in order to place them
in a position to
call the meeting. The respondents relied in this
regard firstly on the provisions of section 71(2)(a) read with
section 65(4)(b)
of the Act. The argument as I understand it is that
the provisions of section 65(4)(b) are made applicable to affected
directors
by virtue of the clause ‘
at least equivalent to
that which a shareholder is entitled to receive’
in section
71(2)(a). Therefore, the proposed resolution that has to be included
in the notice to the respondents must be ‘
accompanied by
sufficient information or explanatory material’
to enable
the affected director ‘
to determine whether to participate
in the meeting and seek to influence the outcome of the vote on the
resolution.’
In this manner the resolution is at least
equivalent to that which a shareholder is entitled to receive and
thus complies with
section 65(4)(b) that is equally applicable to
affected directors. This argument is misconceived. On a proper
interpretation, the
clause in section 71(2)(a) ‘
at least
equivalent to that which a shareholder is entitled to receive’,
refers to the period of notice and not to the proposed
resolution. The subsection provides for three jurisdictional
requirements
before the shareholders may consider the proposed
resolution, namely that the affected directors (i) be given due
notice of the
meeting at least equivalent to the notice period that
the shareholders are entitled to receive; (ii) be provided with the
proposed
resolution; and (iii) be afforded a reasonable opportunity
to make a presentation before the resolution is put to a vote. There
is no requirement that the resolution that has to be provided
to the affected directors should comply with section 65(4)(b).
The
latter section is expressly limited to shareholders and is of no
assistance to the respondents. It is to be expected that there
would
have been an express reference to an affected director if the
intention was to make the provision applicable also to directors.
[52]
Mr Nepgen further submitted that section 65(5) supports the
respondents’ contention
in that it provides that not only
shareholders, but also directors, may approach the court for
appropriate relief if they believe
that the form of the resolution
does not satisfy the requirements of section 65(4). This is a
non
sequitur.
The fact that directors are empowered to approach the
court does not mean that the requirements of section 65(4)(b) also
apply to
them. It simply gives effect to their direct and substantial
interest in ensuring that a resolution aimed at their removal
complies
with section 65(4)(b) and that shareholders who are required
to vote on their removal are fully informed. This conclusion is
supported
by the express exclusion of directors from the latter
subsection.
[53]
The further leg to the respondents’ argument is that the
directors’ right to
make a presentation at the meeting,
entrenched in section 71(2)(b), must at the very least be read with
section 65(4) thereby entitling
them to a proposed resolution
‘
expressed with sufficient clarity and specificity and
accompanied by sufficient information or explanatory material.’
This as well as the provision of the reasons or grounds for the
removal are necessary to enable the directors to seek to influence
the outcome of the vote on the resolution. To hold otherwise would
render the provisions of section 65(5) nugatory. I have already
dealt
with the proper effect of section 65(5). These considerations relied
upon by the respondents are expressly limited to instances
where
removal is at the instance of the board when statement of reasons
must be provided to the affected directors. Shareholders
are not
under a comparable duty where they wish to remove directors whom they
have elected and whose continuation in office is
subject to the will
of those shareholders.
[54]
The respondents’
contention that the
audi
alteram partem
principle
applies in the present circumstances is linked to their above
argument. Mr Nepgen submitted that
Timcke
[14]
is authority for this
proposition and supports the argument that the respondents are
entitled to be provided with reasons or grounds
for their proposed
removal in satisfaction of the
audi
alteram partem
principle.
This will inform them of the case they have to meet and will enable
them to make meaningful presentations at the
meeting.
[55]
Mr Richards submitted
that
Timcke
is clearly wrong and that
the correct legal position is reflected in
Natmed
[15]
to the effect that the
shareholders are not obliged to provide reasons for the proposed
removal of a director
.
[56]
It is common cause that
the court in
Timcke
[16]
erred in concluding that
the constitutional court in
Motau
[17]
held that section 71(2)
of the Act requires compliance with the rules of natural justice.
This was clearly the basis of the court’s
conclusion in
Timcke
that directors had to be
provided with the reasons for their intended removal and that in the
absence thereof the resolutions for
their removal as directors had to
be set aside.
[57]
I respectfully disagree
with the decision in
Timcke.
In my
view, the correct legal position has been set out in
Natmed.
[18]
I agree with the
conclusion in
Natmed
that
the requirement in section 71(2)(b) that the director concerned be
afforded a ‘
reasonable
opportunity to make a presentation … to the meeting before the
resolution is put to the vote’
does
not support the conclusion that reasons for the intended removal must
be given to the director prior to the decision to remove
being taken.
Section 71(2) contrasts with the provisions of section 71(4) which
deal with the removal of a director by the board.
The latter section
expressly requires, before the board considers a resolution for the
removal of a director, that notice of the
meeting must be given to
the director, including a copy of the resolution and a statement
setting out the reasons for the resolution
with sufficient
specificity to reasonably permit the director to prepare and present
a response. It is noteworthy that section
71(4)(b), similarly to
section 71(2)(b), affords the director the right to make a
presentation to the meeting. However, section
71(2)(a) unlike section
71(4)(a) does not provide for a statement of reasons to be furnished
for the director’s removal.
It follows that where the removal
of a director is sought by the shareholders, the latter are not
required to provide the director
with reasons or grounds for their
intended action. It is well-established that directors serve at the
behest of the shareholders
who elected them. I agree with the
conclusion in
Natmed
that
the legislature deliberately preserved the right of the majority
shareholders to remove, without cause, a director who they
no longer
support. It follows that the respondents (who were elected by
the applicants) are not entitled to reasons or grounds
for the
proposed resolutions for their removal as directors.
[19]
The absence of a statement of reasons or of sufficient information or
explanatory material accompanying the resolutions, do not
preclude
the respondents from issuing a notice or calling the meeting demanded
by the applicants.
[58]
Furthermore, any averred shortcomings in the resolutions as
formulated do not constitute
justification for not issuing the notice
of the meeting. Any issues with regard to the resolutions must be
raised at the meeting.
It is not open to the respondents to
unilaterally decide beforehand that the resolutions are deficient and
to rely thereon as a
reason not to issue the notice of the meeting.
The sufficiency of the resolutions accordingly does not arise at this
stage. It
does not affect the duty of the respondents to call the
meeting.
[59]
I should add that the respondents’ request conveyed in the
above letter of JGS dated
12 September 2024 (annexure ‘FA31’)
for ‘
any examples of such deviation from the dispassion and
independence’
which the applicants aver they lack in
discharging the responsibilities as directors, is not justified and
smacks of being a stratagem
and a delaying tactic. It is abundantly
clear from the reasons that were provided in the exchange of
correspondence between the
attorneys that the respondents have lost
the applicants’ support and trust. The applicants contend in
this regard that the
respondents are unduly influenced by Baeyens who
orchestrates their conduct as directors to the detriment of Capeco.
This is clearly
the case they will have to meet at the meeting. As
things stand and regardless of whether they are entitled to reasons,
the respondents
are in a position reasonably to prepare for their
presentations at the meeting.
[60]
To reiterate, the applicants have, in my view, provided the
respondents with sufficiently
clear and specified reasons for their
intended removal in the above quoted exchange of correspondence
between RNI and JGS. No further
information or explanatory material
can conceivably take the matter any further. As indicated, it is
readily apparent that there
has been a fundamental breach of trust
between the parties and that the respondents no longer enjoy the
support of the applicants
who constitute the entire body of
shareholders of Capeco.
CONCLUSION
[61]
It follows that the applicants have made out a case for appropriate
relief in terms of
section 61(12) of the Act compelling the
respondents to call a shareholders’ meeting in terms of section
61(3) of the Act.
However, before the respondents are obliged to call
the meeting, the applicants should furnish Capeco with the
resolutions which
are to be considered at the meeting. These
resolutions are to be drafted by the applicants. This will be
reflected in the order
to be granted in the matter.
ORDER
[62]
In the result I make the following order:
(a) the applicants’
non-compliance with the provisions of the Uniform Rules concerning
time periods, forms and service
is condoned and the matter is allowed
to be heard as one of urgency in terms of Rule 6(12);
(b) the applicants
are directed to furnish the respondents with the resolutions for the
removal of the third and fourth respondents
as directors of the first
respondent to be considered at the shareholders’ meeting
referred to in paragraph (c) below, within
five (5) days of the date
of this order;
(c) the respondents
are directed, within five (5) days after receipt of the resolutions
referred to in paragraph (b) above:
(i) to give notice of a
meeting of the shareholders of the first respondent, to each of the
applicants (by means of email), to be
held at the offices of the
first respondent in Gqeberha, Eastern Cape Province at 14h00 on a
date no later than 10 business days
after the date of delivery of
such notice, for consideration of the resolutions referred to in
paragraph (b) above that the third
and fourth respondents be removed
as directors;
(ii) to give notice to
each of the third and fourth respondents of the meeting of
shareholders referred to in paragraph (c)(i) above,
to provide them
with the resolutions referred to in paragraph (b) above, and to
advise them that each of them will be afforded
a reasonable
opportunity at the meeting to make a presentation before the
resolutions are put to a vote;
(d) the costs of
the application shall be paid by the third and fourth respondents,
including the costs of counsel on scale
C as contemplated in Rule
69(7).
D.O. POTGIETER
JUDGE OF THE HIGH
COURT
Date of
hearing:
10 October 2024
Date of delivery of
judgment: 28 November
2024
Counsel for the
Applicants: Adv JG
Richards SC, instructed by Rushmere Noach Inc.,
5 Ascot Office Park,
Conyngham Road, Greenacres, Gqeberha
Counsel for the Third and
Fourth
Respondents:
Adv J Nepgen,
instructed by Joubert Galpin Searle, 173 Cape Road,
Mill Park,
[1]
Section
61 provides as follows in relevant part:
’
61.
Shareholders meeting.-
(1)
The board of a company, or any other person specified in the
company’s Memorandum of Incorporation or rules, may call
a
shareholders meeting at any time.
(2) Subject to section
60, a company must hold a shareholders meeting-
…
(c) when otherwise
required-
(i) in terms of
subsection (3) or (7);
…
(3) Subject to
subsections (5) and (6), the board of the company, or any other
person specified in the company's Memorandum of
Incorporation or
rules, must call a shareholders meeting if one or more written and
signed demands for such a meeting are delivered
to the company, and-
(a) each such demand
describes the specific purpose for which the meeting is proposed;
and
(b) in aggregate,
demands for substantially the same purpose are made and signed by
the holders, as of the earliest times specified
in any of those
demands, of at least 10% of the voting rights entitled to be
exercised in relation to the matter proposed to
be considered at the
meeting.
(4) A company’s
Memorandum of Incorporation may specify a lower percentage in
substitution for that set out in subsection
(3)(b).
…
(12) If a company fails
to convene a meeting for any reason other than as contemplated in
subsection (11)-
…
(b) when required by
shareholders in terms of subsection (3)
…
a shareholder may apply
to a court for an order requiring the company to convene a meeting
on a date, subject to any terms, that
the court considers
appropriate in the circumstances.’
[2]
Act
71 of 2008.
[3]
Nelson
Mandela Metropolitan Municipality v Greyvenouw CC
2004(2)
SA 81 (SECLD) para 34 (‘
Greyvenouw’)
;
Stock
& Another v Minister of Housing & Others
2007(2)
SA 9 (C) at 12I.
[4]
The
section provides that:
‘
The
shareholders of a company may enter into any agreement with one
another concerning any matter relating to the company, but
any such
agreement must be consistent with the Act and the company’s
Memorandum of Incorporation, and any provision of
such agreement
that is inconsistent with this Act or the company’s Memorandum
of Incorporation is void to the extent of
the inconsistency.’
[5]
Greyvenouw
supra
note 3.
[6]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012(4)
SA 593 (SCA) para 18;
Capitec
Bank Holdings Limited v Coral Lagoon Investments 194 (Pty) Ltd &
Others
2022(1)
SA 100 (SCA) para 25.
[7]
The
New Shorter Oxford English Dictionary (1993) p 2557.
[8]
The
section provides that:
’
73.
Board meetings. –
(1)
A director authorised by the board of a company –
may call a meeting of
the board at any time; and
must call such a meeting
if required to do so by at least –
(i) 25% of the
directors, in the case of a board that has at least 12 members; or
(ii) two directors, in
any other case.’
[9]
2018(1)
SA 157 (GJ) paras 80 & 82 (‘
Petrotank’
).
[10]
The
section is to the following effect:
’
62.
The purpose of meeting
.
– (1) The company must deliver a notice of each shareholders
meeting in the prescribed manner and form to all of the shareholders
of the company as of the record date for the meeting, at least –
(a) 15 business days
before the meeting is to begin, in the case of a public company or a
non-profit company that has voting members;
or
(b) 10 business days
before the meeting is to begin, in any other case.
…
(3) A notice of a
shareholders meeting must be in writing, and must include –
(a) the date, time and
place for the meeting, and the record date for the meeting;
(b) the general purpose
of the meeting, and any specific purpose contemplated in section
61(3)(a)
(c) a copy of any
proposed resolution of which the company has received notice, and
which is to be considered at the meeting,
and a notice of the
percentage of voting rights that will be required for that
resolution to be adopted.’
[11]
The
section provides in relevant part that:
’
71.
Removal of directors. –
(1)
Despite anything to the contrary in a company’s Memorandum of
Incorporation or rules, or any agreement between a company
and a
director, or between any shareholders and a director, a director may
be removed by an ordinary resolution adopted at a
shareholders
meeting by the persons entitled to exercise voting rights in any
election of that director, subject to subsection
(2).
(2) Before the
shareholders of the company may consider a resolution contemplated
in subsection (1)-
(a) the director
concerned must be given notice of the meeting and the resolution, at
least equivalent to that which a shareholder
is entitled to receive,
irrespective of whether or not the director is a shareholder of the
company; and
(b) the director must be
afforded a reasonable opportunity to make a presentation, in person
or through a representative, to the
meeting, before the resolution
is put to a vote.
(3) If a company has
more than two directors, and a shareholder or director has alleged
that a director of the company –
(a) has become-
(i) ineligible or
disqualified in terms of section 69, other than on the grounds
contemplated in section 69(8)(a); or
(ii) incapacitated to
the extent that the director is unable to perform the functions of a
director, and is unlikely to regain
that capacity within a
reasonable time; or
(b) has neglected, or
been derelict in the performance of, the functions of director,
the board, other than
the director concerned, must determine the matter by resolution, and
may remove a director whom it has determined
to be ineligible or
disqualified, incapacitated, or negligent or derelict, as the case
may be.
(4) Before the board of
a company may consider a resolution contemplated in subsection (3),
the director concerned must be given
–
(a) notice of the
meeting, including a copy of the proposed resolution and a statement
setting out the reasons for the resolution,
with sufficient
specificity to reasonably permit the director to prepare and present
a response; and
(b) a reasonable
opportunity to make a presentation, in person or through a
representative, to the meeting before the resolution
is put to a
vote.’
[12]
Cassim
et
al Contemporary Company Law
3ed
(2021) p604 para 10.14.3 (‘Cassim’).
[13]
The
demand made by Mark Stewart was to the following effect:
‘
The
writer has been appointed as a director of each of the shareholders,
each of which is authorised and directed him to represent
it and to
make demand in terms of s61(3) of the Act that you convene a meeting
of shareholders.
…
This letter, duly signed
by the writer on behalf of all of the shareholders, constitutes such
demand. The shareholders require
that the board convene a meeting of
the shareholders of the Company for the following purposes:
1. To consider a
resolution pursuant to the provisions of s71(1) of the Act that
Nokuthula Tana (‘Tana’) be removed
as a director of the
Company;
2. To consider a
resolution pursuant to the provisions of s71(1) of the Act that
Hendry John Tarr (‘Tarr’) be removed
as a director of
the Company;
3. To elect Mark Stewart
as a director of the Company.
Given the appointment of
the writer to represent each of the shareholders at the meeting to
be convened (and given the provisions
of s71(2)(a) of the Act and
the fact that each of Tana and Tarr is employed and resident in
Gqeberha) the shareholders propose
that the meeting be held at a
venue in Gqeberha.
Yet further, given the
requirements of s62(1)(b) and of s71(2)(b) of the Act it is proposed
that the meeting be convened at
14H00 on Tuesday, 20 August
2024
.’
[14]
Pretorius
& Another v Timcke & Others
(15479/14)
[2015] ZAWCHC 215
(2 June 2015).
[15]
Miller
v Natmed Defence (Pty) Ltd & Others
2022(2)
SA 554 (GJ).
[16]
Note
14 at para7.
[17]
Minister
of Defence & Military Veterans v Motau & Others
2014(5)
SA 69 (CC).
[18]
Note
14 at paras 33-36.
[19]
Cassim
ibid
note
12; Rehana Cassim ‘
Contesting
the Removal of Directors under the Companies Act’
(2016)
133(1) South African Law Journal 136
; Caroline Ncube ‘
You’re
fired! The removal of directors under the Companies Act 71 of 2008’
(2011)
128 South African Law Journal 33
at 39: ‘
No
grounds for removal are provided for with respect to removals by
shareholders. This is because “directors serve at the
pleasure
of shareholders” and consequently shareholders may effect
removals without cause’
and
at 50: ‘ …
the
2008 Act does not require that shareholder removals be for cause.’