Tag archives: Company law

Robo-directors in the boardroom

Artificial intelligence (AI) is rapidly developing and may in the future get a seat at the boardroom table. The ability of AI to fulfil certain tasks, such as data collection and processing, at a pace exponentially faster than its human counterparts means that businesses cannot function properly without the use of AI in some shape … Continue reading

Increased directors’ duty of care in the case of approaching business crisis (Italy)

Italian directors now have a specific duty of care to properly manage the company if a business crisis or insolvency is looming. The Italian parliament recently passed a law empowering the government to adopt legislative measures to reform Italy’s current legal framework on business crisis and insolvency. The directors’ enhanced duty of care starts long … Continue reading

Minority shareholder protection and share buy-back as a remedy

Minority shareholders are not without recourse when they have suffered from oppressive or unfairly prejudicial conduct by the majority. The minority shareholder can approach the court for an order for the company to buy back their shares. The Companies Act 2008 provides for the business and affairs of a company to be managed by or … Continue reading

UK companies should continuously identify and engage with key stakeholders

A list of core principles were recently published in the UK to guide the board of directors of a company to allow for greater involvement of stakeholders, other than shareholders, in decision-making. These stakeholders would include employees, suppliers, customers, the community, and the environment. Two UK governance institutes, with the support of the UK government, … Continue reading

King IV and BEE – previously voluntary, now mandatory in the amendments to the JSE Listings Requirements

The Financial Services Board amendments to the JSE Listings Requirements (board notice 52 of 2017) which are now in effect, are primarily focused on two aspects: They include certain of the obligations set out in the King Report on Corporate Governance for South Africa, 2016 (King IV) as mandatory obligations in the Listings Requirements (the … Continue reading

Deregistered corporation comes back to life retrospectively on reinstatement

A corporation which is deregistered under the Companies Act 2008 is automatically and retrospectively re-vested with its rights when it is reinstated (under section 82(4)). In ZNK Investments CC v Luckytso Transport and Construction CC, a sale in execution of a deregistered close corporation had taken place whilst it was deregistered. It was held that the … Continue reading

Economic and social consequences of liquidation relevant to business rescue

The Supreme Court of Appeal has aligned itself with a statement by the high court that where the liquidation of a company will occasion significant collateral damage both economically and socially and destroy wealth and livelihoods, the Companies Act recognises that business rescue is the better option. Adverse socio-economic consequences like job losses should be … Continue reading

Prove liquidation claims in three months

If a company goes into liquidation claims must be lodged and proved within three months as from the conclusion of the second meeting of creditors of the insolvent company. The case of Wishart v Billiton is a reminder that although the Companies Act 1973 was largely repealed, the provisions relating to winding-up of companies remain … Continue reading

Shareholder has no claim for company’s loss

A plaintiff who was a shareholder in a liquidated company sued the company’s bank for a R50 million loss in value of his indirectly held shareholding allegedly caused by intentional conduct of the bank for lending money beyond the means of the company and then liquidating the company. The delictual claim for pure economic loss failed … Continue reading

The letterhead is not dead

Email correspondence has by and large superseded physical correspondence and email signatures have effectively replaced company letterheads as the first impression a third party has of a company’s corporate branding identity. However, a company will usually have a letterhead for use for company correspondence. As part of setting up, a company should create a letterhead … Continue reading

Holding a director liable for the debts of a company needs proof of fraud or recklessness

Default judgment, without any evidence being led, was granted against a director under section 424(1) of the Companies Act 1973 on the basis that the business of the company was carried on recklessly or with intent to defraud creditors or for some other fraudulent purpose. No evidence was led to establish these allegations. Even though the … Continue reading

Business rescue: Constitutional Court upholds SCA judgment regarding interpretation of binding offer in Section 153(1b)(ii) of the Companies Act

The Constitutional Court refused leave to appeal against the Supreme Court of Appeal decision that a “binding offer” to a creditor in business rescue proceedings, made under s 153(1)(b)(ii) of the 2008 Companies Act, is not automatically binding on the creditor. The appeal had “no prospects of success” which effectively confirms the correctness of the interpretation of … Continue reading

10 things to know about South African private companies

In South Africa a company is recognised as a legal entity separately from its shareholders. Any claims arising from the company’s activities would be brought against the company itself and not against its holding company or shareholders. The statutory liability of a shareholder in a private company is limited to its respective capital contributions to … Continue reading

10 things to know about foreign companies as external companies in South Africa

Foreign companies with business or non-profit activities in South Africa may be required to register with the Companies and Intellectual Properties Commission (CIPC) as an external company. Section 23 of the Companies Act 2008 provides that a foreign company must register within 20 business days of first beginning to “conduct business” in South Africa. A company … Continue reading

A subordinated creditor can liquidate its borrower

A creditor whose loan is subordinated is nonetheless a contingent creditor of the borrower in terms of section 346 of the Companies Act, 1973 (which still applies to the liquidation of companies) and the creditor is accordingly well within its rights to apply for the winding-up of the debtor in default. The appellant in Absa Bank … Continue reading

Business rescue: binding offer to purchase voting interest is not automatically binding on creditor that votes against the plan

In an important judgment delivered by the Supreme Court of Appeal on 20 May 2015 in African Banking Corporation of Botswana Ltd v Kariba Furniture Manufacturers (Pty) Ltd and others, the Supreme Court of Appeal held that a purportedly binding offer made to a creditor, who opposes a business rescue plan, is not automatically binding … Continue reading

How many directors must pass a round robin resolution?

A round robin resolution can be passed by a majority of the directors (provided all directors get notice of the proposed resolution) unless the MOI of the company provides otherwise (section 74(1) of the Companies Act 2008). But many registered companies have not updated their MOIs and still use the form of the old Table B … Continue reading