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SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

IN THE COMPANIES TRIBUNAL OF SOUTH AFRICA

Case No: CT011Nov2017

In the ex parte matter of:

Cedar Creek Home Owners’ Association NPC

APPLICANT

DECISION

1. INTRODUCTION

1.1       The applicant is Cedar Creek Home Owners' Association NPC (2002/019331/08).

1.2       The applicant applies, in terms of s 61(7) of the Companies Act 71 of 2008 (“Companies Act” / “Act”) and para 4.1(2)(b) of the Memorandum of Incorporation (“MoI”) of the applicant, for an extension of the period for convening an Annual General Meeting (“AGM").

1.3       The application is brought by Jitesh Harshadrai Bhoola (ID [8...]), properly authorised to do so by a resolution of the board of the applicant

2. BACKGROUND

2.1       The applicant held an AGM on 26 September 2016. In terms of para 4.1(2)(b) of the MoI, the applicant must hold an AGM once in every calendar year within 6 (six) months after the end of its financial year, but no more than 15 (fifteen) months after the date of the previous annual general meeting, or within an extended time allowed by the Companies Tribunal, on good cause shown.

2.2       The provisions of para 4.1(2)(b) of the MoI are, with one exception, verbatim the same as s 61(7) of the Companies Act.

2.3       Para 4.1(3)(a)(ii) of the MoI requires, as far as it is relevant here, the audited financial statements of the applicant to be presented. These provisions are essentially the same as that of s 61(8)(a)(ii) of the Companies Act.

2.4       Due to, inter alia, the resignation of the board of directors of the applicant, it was not possible to finalise the audited financial statements of the applicant timeously for submission to an AGM within the time stipulated in the MoI.

2.5       The applicant now applies, as per para 4.1 of the founding affidavit,  to the Companies Tribunal (“Tribunal”) in terms of para 4.1(2)(b) of the MoI and s 61(7) of the Companies Act to extend the AGM date from 27 December 2017 to 31January 2018 (emphasis is mine). The founding affidavit, however, indicates in the heading, that the application is in terms of 61(7) of the Companies Act.

3. ISSUES

3.1       It should be determined if the Tribunal has jurisdiction in this application. If the answer is in the positive, the reasons provided for the extension should be evaluated and it must be decided if there is “good cause” to grant the application.

3.2       If the Tribunal does not have jurisdiction, the application must fail and there is no need to determine whether the application is based on “good cause”.

4. APPLICABLE LAW

4.1       As stated above the application is brought on two grounds, ie based on the provisions of para 4.1(2)(b) of the MoI and in terms of s 61(7) of the Companies Act.

4.2       Section 61 (7) of the Companies Act provides as follows:

“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.”

5. EVALUATION

5.1       In respect of the application of s 61(7) of the Companies Act I need not traverse the extensive arguments and logical reasoning of Mr Khashana Manamela in Ex parte Gauteng Cricket Board NPC CTR001/11 /2012 (25 March 2012).

5.2       I agree with his decision that 61(7) of the Companies Act only applies to public companies, and that an NPC company is not such a company and will merely add some additional comments.

5.3       Section 1 of the Companies Act defines a public company as follows:

“ ‘public company’ means a profit company that is not a state-owned company, a private company or a personal liability company.”

5.4       A “profit company” means a company incorporated for the purpose of financial gain for its shareholders (s 1 of the Companies Act).

5.5       A “non-profit company”, according to s 1 of the Companies Act, means a company—

(a)       incorporated for a public benefit or other object as required by item 1 (1) of Schedule 1; and

(b)       the income and property of which are not distributable to its incorporators, members, directors, officers or persons related to any of them except to the extent permitted by item 1 (3) of Schedule 1;

5.6       It is therefore clear that an NPC is not a “profit company” and cannot be included in the definition of a “public company”.

5.7       Section 10 of the Companies Act provides in respect of non-profit companies as follows:

“10.   Modified application with respect to non-profit companies.—(1)  Every provision of this Act applies to a non-profit company, subject to the provisions, limitations, alterations or extensions set out in this section, and in Schedule 1.

…

(3)  Sections 58 to 65, read with the changes required by the context—

(a)       apply to a non-profit company only if the company has voting members; and

(b)       when applied to a non-profit company, are subject to the provisions of item 4 of Schedule 1.”

5.8       The provisions referred in Schedule 1 are in respect of the nature of the NPC in the sense that it must be operated, directly or indirectly, to advance the “public benefit object”, and that it cannot pay, whether in winding-up or otherwise, any income or transfer any assets to its members: see also Minister of Environmental Affairs v Recycling and Economic Development Initiative of South Africa NPC, Minister of Environmental Affairs v Recycling and Kusaga Taka Consulting (Proprietary) Limited (9675/2017, 10123/17) [2017] ZAWCHC 101 (15 September 2017).

5.9       Section 10(3), however, also provides that ss 58 to 65, read with the changes required in the context, apply to non-profit companies.

5.10    Said ss 58 to 65, however, refer to various types of companies and in s 61 there is a clear distinction between public companies and other types of companies.

5.11    In respect of meetings s 61(2)(c) provides that “a company” must convene a shareholders’ meeting when otherwise required in terms of s 61(3) or  s 61(7), or if required by the company’s Memorandum of Incorporation.

5.12    Section 61(7) requires that a public company “must convene an annual general meeting”, with the effect that companies other than public companies must convene such a meeting when required by the Memorandum of Incorporation.

5.13    Therefore, when read with the “changes required by the context”, there is no justification that s 61(7) will apply to non-profit companies to the exclusion of the provisions that require other companies to hold annual general meetings as provided for in the Memorandum of Incorporation of the particular company.

5.14    The non-profit company is, based on the ordinary rules of hermeneutics as applied above, not a public company. This is the sensible meaning and is to be preferred to one that leads to insensible or unbusinesslike results: Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) para 18.

5.15    If the provisions in respect of a public company are to be applied to a non-profit company, the legislature could have made it expressly applicable, such as in the case of a state-owned company as provided for in s 9(1) of the Companies Act.

5.16    Also, the express provisions in s 19(3) of the Companies Act 61 of 1973 that a section 21 company (company limited by guarantee), the predecessor of the non-profit company, is deemed to be a public company, were not transferred to the Companies Act 71 of 2008.

5.17    It is accepted that the legislature was aware of this and the fact that the deeming provision was not transferred to the Companies Act 71 of 2008 is an indication that the position was intended to be changed: see eg Ngwenda Gold (Pty) Ltd v Precious Propspec Trading 80 (Pty) Ltd 2011/3166 14 December 2011 (GSJ) and Boost Sports Africa (Pty) Ltd v South African Breweries Ltd [2015] 3 All SA 255 (SCA); 2015 (5) SA 38 (SCA) in respect of a similar treatment of s 13 of the Companies Act 61 of 1973.

5.18    Section 61(7) is therefore not applicable to a non-profit company, neither as in respect of a compulsory annual general meeting, nor in respect of the jurisdiction of the Tribunal to grant an extension.

5.19    What is then important is to determine whether the jurisdiction of the Tribunal can be “extended” beyond that provided for in the Companies Act.

5.20    The Tribunal is created by s 193 of the Companies Act to perform the functions as in s 195 and does not have inherent powers: See Senwes Ltd v Competition Commission of South Africa (118/2010) [2011] ZASCA 99 (1 June 2011) and the decision/ruling of this Tribunal in Duduzile Cynthia Myeni vs CIPC CT006Mar2017 (29 Jun 2017) paras 9-11.

5.21    The powers/functions of the Tribunal as statutory body are stated in s 195(1) of the Companies Act that provides as follows:

“(1) The Companies Tribunal, or a member of the Tribunal acting alone in accordance with this Act, may—

(a) adjudicate in relation to any application that may be made to it in terms of this Act, and make any order provided for in this Act in respect of such an application;

(b) assist in the resolution of disputes as contemplated in Part C of Chapter 7; and

(c) perform any other function assigned to it by or in terms of this Act, or any law mentioned in Schedule 4.”

5.22    The Tribunal can therefore only adjudicate matters that “may be made to it in terms of this Act, and make any order provided for in this Act in respect of such an application.”

5.23    It can, in addition, also assist in the adjudication of disputes and perform a function assigned to it by the Companies Act or any law/Act mentioned in Schedule 4 of the Companies Act.

5.24    Whether the jurisdiction of the Tribunal can be extended to matters that the parties by contract (ie the MoI) decide must be adjudicated by the Tribunal, is doubted.

5.25    Various arguments can be offered, if these are necessary in light of the clear wording of ss 193 and 195 of the Companies Act.

5.26    In the first instance it can be argued the para 4.1(2)(b) of the MoI of the applicant attempts to amend an unalterable provision in the Act, ie s 61(7). Such a provision is void in terms of s 15(1)(b) (subject to exceptions not applicable here).

5.27    In the second instance it can be argued that if an extension of the Tribunal’s powers were to be possible, the legislature would have stated it clearly. Such an example is to be found in s 118(1)(c)(iii) which makes it clear that the Takeover Regulations only apply to public companies and state owned companies, but will apply also to a private company is the MoI of that company and its securities are subject to said Regulations.

6. FINDING

Section 61(7) of the Companies Act does not apply to a non-profit company and a provision in the Memorandum of Incorporation cannot extend the jurisdiction to a matter that is not provided for in the Companies Act.

7. ORDER

The application is refused.

PIET DELPORT

 

COMPANIES TRIBUNAL: MEMBER

DATE: 22 November 2017

 

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