1
ADVANCED COMPANY LAW CASES
Gohlke and Schneider v Westies Minerale (Edms) Bpk:
There were three shareholders. Two of them signed a letter in which they,
acting in terms of a shareholders’ agreement, appointed one Wiehahn as
director. The third shareholder initially objected to this appointment, but
later withdrew the objection in writing. The first part of the judgment of
Trollip JA deals with whether the parties had agreed that the two
shareholders could appoint a director by themselves. The court found that
they could. However, it is the second part of the judgment that is relevant for
this topic. The court said that even if one were to assume that the letter of
appointment did not suffice to appoint a director, Wiehahn would
nevertheless have been appointed as director because all the shareholders
unanimously agreed on his appointment and it was thus not necessary to
have convened a meeting to appoint him.
In re Duomatic Ltd:
Only the members who would have been entitled to vote on the issue needed
to agree and not, for example, holders of non-voting preference shares. In
this case the shareholders did not hold a meeting, but it was clear that the
issue of directors' remuneration was, in fact, considered by them when they
prepared the accounts of the company.
Pender v Lushington:
The decision in Pender v Lushington is important for two reasons. First, it
confirms that shareholders, unlike directors, do not have to exercise their
voting rights for the benefit of the company and can act entirely in their own
interests. Secondly, it shows that a shareholder has a right to have his or
her vote recorded even if it would not change the result of the voting. The
right to vote is an important membership right and a shareholder may
institute a personal action to enforce this right.
Robinson v Randfontein Estates Gold Mining Co Ltd
Facts: the co wanted to buy a farm, but couldn’t come to an agreement with
its owner. Robinson, the chairman of the board bought the farm in his own
name for R120 000 and sold it to the co for a profit of R550 000
AD held: Robinson wasn’t justified in making a profit from his office or
placing himself in a position where his personal interests conflicted with his
duties. He was ordered to repay the co the profit of R430 000 which he had
made.
It was clearly the director's duty to obtain the particular asset or opportunity
for the company. The fact that the other contracting party preferred to
contract with the director in his personal capacity rather than the company
did not alter this fact. It can be inferred from the facts in Robinson that the
defendant (the company's chairman) had at least an implied mandate to
purchase the asset on behalf of the company. This decision is another
example of the application of the secret profit rule.
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Fisheries Developments Corporations of SA v AWJ Investements (Pty)
Ltd:
The court summarised the principles governing the duty of care and skill.
The judge confirmed that the extent of a director's duty of care depends to a
considerable degree on the nature of the company's business and on any
particular obligations assumed by or assigned to the director.
The court held that in that regard there is a difference between the full-time
or executive director, who participates in the day to day management of the
company's affairs or of a portion thereof, and the non-executive director who
has not undertaken any special obligation. The latter is not bound to give
continuous attention to the affairs of his company. His duties are of an
intermittent nature to be performed at periodical board meetings, and at any
other meetings, which may require his attention. He is not, however, bound
to attend all such meetings, though he ought to whenever he is reasonably
able to do so.
A director is not required to have special business expertise, or ability or
intelligence, or even experience in the business of the company. He or she is,
nevertheless, expected to exercise the care, which can reasonably be
expected of a person with his or her knowledge and experience.
A director is not liable for mere errors of judgment. In respect of all duties
that may properly be left to some other official, a director is, in the absence
of grounds for suspicion, justified in trusting that official to perform such
duties honestly (that reliance on an apparently trustworthy person may be a
good defence is expressly recognised by s 284(4) (b) of the Companies Act of
1973 in connection with the keeping of proper accounting records). A
director is entitled to accept and rely on the judgment, information and
advice of the management, unless there are proper reasons for querying
such.
A director is not bound to examine entries in the company's books.
Obviously, a director exercising reasonable care would not accept
information and advice blindly. He or she would accept it, and would be
entitled to rely on it, but would give it due consideration and exercise his or
her own judgment in the light thereof.
Omar v Inhouse Venue Technical Management (Pty) Ltd 2015 (3) SA 146
(WCC) (section 75)
The Applicant (“Omar”) is the minority shareholder (45%) in the First
Respondent (“Inhouse”), which is the corporate entity on the rocks, while the
Second Respondent (“Gearhouse SA”, a wholly owned subsidiary of
Gearhouse SA Holdings (Pty) Ltd) holds 50% of the shares. The remaining
5% is held by the Third Respondent (“Govender”).
The Fourth and Fifth Respondents (“Lapid” and “Abbas”) effectively control
Gearhouse Holdings and Gearhouse SA, of which they are both directors.
Lapid and Abbas, together with Omar, Govender and three others (Abbas’
wife, Neelofa Khan, James Demore and Nkosinathi Biko) are the directors of
Inhouse.
ADVANCED COMPANY LAW CASES
Gohlke and Schneider v Westies Minerale (Edms) Bpk:
There were three shareholders. Two of them signed a letter in which they,
acting in terms of a shareholders’ agreement, appointed one Wiehahn as
director. The third shareholder initially objected to this appointment, but
later withdrew the objection in writing. The first part of the judgment of
Trollip JA deals with whether the parties had agreed that the two
shareholders could appoint a director by themselves. The court found that
they could. However, it is the second part of the judgment that is relevant for
this topic. The court said that even if one were to assume that the letter of
appointment did not suffice to appoint a director, Wiehahn would
nevertheless have been appointed as director because all the shareholders
unanimously agreed on his appointment and it was thus not necessary to
have convened a meeting to appoint him.
In re Duomatic Ltd:
Only the members who would have been entitled to vote on the issue needed
to agree and not, for example, holders of non-voting preference shares. In
this case the shareholders did not hold a meeting, but it was clear that the
issue of directors' remuneration was, in fact, considered by them when they
prepared the accounts of the company.
Pender v Lushington:
The decision in Pender v Lushington is important for two reasons. First, it
confirms that shareholders, unlike directors, do not have to exercise their
voting rights for the benefit of the company and can act entirely in their own
interests. Secondly, it shows that a shareholder has a right to have his or
her vote recorded even if it would not change the result of the voting. The
right to vote is an important membership right and a shareholder may
institute a personal action to enforce this right.
Robinson v Randfontein Estates Gold Mining Co Ltd
Facts: the co wanted to buy a farm, but couldn’t come to an agreement with
its owner. Robinson, the chairman of the board bought the farm in his own
name for R120 000 and sold it to the co for a profit of R550 000
AD held: Robinson wasn’t justified in making a profit from his office or
placing himself in a position where his personal interests conflicted with his
duties. He was ordered to repay the co the profit of R430 000 which he had
made.
It was clearly the director's duty to obtain the particular asset or opportunity
for the company. The fact that the other contracting party preferred to
contract with the director in his personal capacity rather than the company
did not alter this fact. It can be inferred from the facts in Robinson that the
defendant (the company's chairman) had at least an implied mandate to
purchase the asset on behalf of the company. This decision is another
example of the application of the secret profit rule.
, 2
Fisheries Developments Corporations of SA v AWJ Investements (Pty)
Ltd:
The court summarised the principles governing the duty of care and skill.
The judge confirmed that the extent of a director's duty of care depends to a
considerable degree on the nature of the company's business and on any
particular obligations assumed by or assigned to the director.
The court held that in that regard there is a difference between the full-time
or executive director, who participates in the day to day management of the
company's affairs or of a portion thereof, and the non-executive director who
has not undertaken any special obligation. The latter is not bound to give
continuous attention to the affairs of his company. His duties are of an
intermittent nature to be performed at periodical board meetings, and at any
other meetings, which may require his attention. He is not, however, bound
to attend all such meetings, though he ought to whenever he is reasonably
able to do so.
A director is not required to have special business expertise, or ability or
intelligence, or even experience in the business of the company. He or she is,
nevertheless, expected to exercise the care, which can reasonably be
expected of a person with his or her knowledge and experience.
A director is not liable for mere errors of judgment. In respect of all duties
that may properly be left to some other official, a director is, in the absence
of grounds for suspicion, justified in trusting that official to perform such
duties honestly (that reliance on an apparently trustworthy person may be a
good defence is expressly recognised by s 284(4) (b) of the Companies Act of
1973 in connection with the keeping of proper accounting records). A
director is entitled to accept and rely on the judgment, information and
advice of the management, unless there are proper reasons for querying
such.
A director is not bound to examine entries in the company's books.
Obviously, a director exercising reasonable care would not accept
information and advice blindly. He or she would accept it, and would be
entitled to rely on it, but would give it due consideration and exercise his or
her own judgment in the light thereof.
Omar v Inhouse Venue Technical Management (Pty) Ltd 2015 (3) SA 146
(WCC) (section 75)
The Applicant (“Omar”) is the minority shareholder (45%) in the First
Respondent (“Inhouse”), which is the corporate entity on the rocks, while the
Second Respondent (“Gearhouse SA”, a wholly owned subsidiary of
Gearhouse SA Holdings (Pty) Ltd) holds 50% of the shares. The remaining
5% is held by the Third Respondent (“Govender”).
The Fourth and Fifth Respondents (“Lapid” and “Abbas”) effectively control
Gearhouse Holdings and Gearhouse SA, of which they are both directors.
Lapid and Abbas, together with Omar, Govender and three others (Abbas’
wife, Neelofa Khan, James Demore and Nkosinathi Biko) are the directors of
Inhouse.
