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IN THE COMPANIES TRIBUNAL OF SOUTH AFRICA

 

Case No: CT00587ADJ2021

 

In the ex parte matter of:

Aqua Vista Home Owners Association (RF) NPC

APPLICANT

Presiding Member of the Tribunal : P.A. Delport

Date of Decision : 26 February 2021

 

DECISION

 

INTRODUCTION

 

[1] The  applicant is  Aqua Vista  Home  Owners Association  (RF)  NPC (2001/019065/08).

 

[2] The applicant applies for a further an extension of the period for convening an Annual General Meeting (“AGM").

[3] The application is brought by a Mr HB du Toit (ID number: 410603 5016 089 ), properly authorised to do so by a resolution of the board of the applicant dated 4 September 2020.

 

BACKGROUND

 

[4] The applicant held an AGM on 20 February 2019. In terms of para 14.1 of the Memorandum of Incorporation (“MoI”) of the applicant, it must hold an AGM “from time to time” but within nor more than 9 (months) months after the end of every ensuing financial year and within not more than 15 (fifteen) months after the date of the last preceding AGM.

 

[5] The matters to be dealt with at the AGM are, in terms of para 17.1 of the MoI, as follows: “The Annual General Meeting shall deal with and dispose of all matters prescribed by the Act, including the consideration of the annual financial statements, the election of Directors and the appointment and remuneration of an auditor.

 

[6] The applicant now applies, as per para 1 of the founding affidavit, to the Companies Tribunal (“Tribunal”) to extend the AGM date further to 30 May 2020 (not 2021).

 

[7] The applicant submitted a pervious (similar) application to the Tribunal which was granted under CT0450ADJ2020 on 20 November 2020 (not CT0440ADJ2020 as in the founding affidavit).

 

[8] The basis of the application is that the applicant cannot, due to Covid restrictions, hold an AGM and that it is also not permitted, in terms of para

15.4 of its MoI to hold a virtual AGM.

 

[9] The applicant does not indicate under what provision of the Companies Act it brings this application. It is accepted, if CT0450ADJ2020 is considered, that it was in that application in terms of section 61(7) of the Companies Act and thatthe same applies in this application. If this assumption is not correct, the application stands to fail.

 

ISSUES

 

[10] It should be determined if the Tribunal has jurisdiction in this application. If the application is based on section 61(7), the reasons provided for the application for an extension should be evaluated and it must be decided if there is “good cause” to grant the application.

 

[11] 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”.

 

[12] Whether the Tribunal has jurisdiction in this matter was extensively canvassed in Cedar Creek Home Owners’ Association NPC CT011Nov2017 (22 November 2017 and to the extent that those views apply here, it will be repeated and/or expanded upon hereunder.

 

APPLICABLE LAW

 

[13] As stated above it is presumed that the application is brought in terms of section 61(7) of the Companies Act.

 

[14] 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.”

EVALUATION

 

[15] In respect of the application of section 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).

 

[16] 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 I will merely add some additional views to support that decision in respect of section 61(7).

 

[17] 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.”

 

[18] A “profit company” means a company incorporated for the purpose of financial gain for its shareholders (section 1 of the Companies Act).

 

[19] A “non-profit company” (“NPC”), according to section 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;

 

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

 

[21] Section 10 of the Companies Act provides in respect of NPCs 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.” (emphasis is mine).

 

[22] Section 10(3) provides that ss 58 to 65, read with the changes required in the context, apply to NPCs.

 

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

 

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

 

[25] 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 as and when required by the MoI.

 

[26] Therefore, when read with the “changes required by the context”, there is no justification that section 61(7) will apply to NPCs 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.

 

[27] The provisions of sections 58 to 65 are in Part F of Chapter 3 of the Companies Act and the short title of part F is “Governance of companies”.

 

[28] The purpose to make an NPC with members subject to Part F of Chapter 3 is clearly to regulate the relationship of the members vis-à-vis the company and not to require additional compliance of the NPC as a particular type of company, i.e. public or private company.

 

[29] The reference to Part F of Chapter 3 in respect of governance only, is that an NPC can also be established without members, in which case there is no need for regulating or prescribing governance measures.

 

[30] If the interpretation of sections 58 to 65, and particularly section 61(7), has the effect that an NPC with members is seen to be a public company, it clearly begs the question as to what type of company, public or private, an NPC without members will be.

 

[31] Also, sections 58 to 65, and particularly section 61, distinguish between public and private companies. There is no logical reason then why the choice is made that the provisions relating to public companies, and not those in respect of private companies, will be made applicable to an NPC with members.

 

[32] If the provisions in respect of a public company are to be applied to an NPC, and only one with members, the legislature could have made it expressly applicable, such as in the case of a state-owned company as provided for in section 9(1) of the Companies Act.

 

[33] Also, the express provisions in section 19(3) of the Companies Act 61 of 1973 that a section 21 company (company limited by guarantee), the predecessor of the NPC, is deemed to be a public company, were not transferred to the Companies Act 71 of 2008.

 

[34] 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 section 13 of the Companies Act 61 of 1973.

 

[35] The mere nature of a public company, that can have unlimited shareholders and that will do business and acquire capital and loans from the public, and that of an NPC, with the severely restricted operations and business as in Schedule 1 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, are vastly different and to require the same disclosure and accountability for the NPC as for a public company, is just not logical.

 

[36] If the provisions in respect of a public company were supposed to have applied to an NPC, and only to one with members, the legislature could have made it expressly applicable, such as in the case of a state-owned company as provided for in section 9(1) of the Companies Act.

 

[37] The rules of hermeneutics are: “Interpretation is the process of attributing meaning to the words used in a document, be it legislation, some other statutory instrument, or contract, having regard to the context provided by reading the particular provision or provisions in the light of the document as a whole and the circumstances attendant upon its coming into existence. Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production. Where more than one meaning is possible, each possibility must be weighed in the light of all these factors. The process is objective, not subjective. A sensible meaning is to be preferred to one that leads to insensible or unbusinesslike results or undermines the apparent purpose of the document.” Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) para 18; confirmed in Airports Company South Africa v Big Five Duty Free (Pty) Ltd 2019 (5) SA 1 (CC) para 29.

 

[38] The interpretation that section 61(7) as to public companies, and not the provisions in section 61 in respect of private companies, will apply to only an NPC with members, leads to insensible or unbusinesslike results.

 

[39] Section 61(7) is therefore not applicable to an NPC, neither as in respect of a compulsory annual general meeting, nor in respect of the jurisdiction of the Tribunal to grant an extension.

 

FINDING

 

[40] Section 61(7) of the Companies Act does not apply to the applicant and on that basis the Tribunal therefore does not have jurisdiction to grant an extension or not.

 

P.A. DELPORT

COMPANIES TRIBUNAL: MEMBER

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