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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

 

COMPANIES TRIBUNAL OF SOUTH AFRICA

 

 

Case Number: CT00797ADJ/2021

 

 

In the ex parte application of:

 

AMAANAT INVESTMENT HOLDINGS LIMITED        Applicant

(Registration Number: 20[....]06)

 

 

Presiding Member                                   :         Khashane La M. Manamela (Mr.)

 

Date of Decision                                      :         05 October 2021

 

Summary: Application for an extension of time to convene annual general meetings of shareholders in terms of section 61(7)(b) of the Companies Act 71 of 2008 –  section 61(7)(b) requires an applicant to show “good cause” to be granted relief – applicant’s grounds for extension based on the restrictions on movement and gatherings of persons (applicant has around 6000 shareholders) emanating from measures to combat the COVID-19 pandemic imposed by way of regulations made under section 27(2) of the Disaster Management Act 57 of 2002 – good cause shown and extension granted for the years ending 28 February 2020 and 28 February 2021 until 28 February 2022.

 

 

DECISION (Reasons and an Order)

 

Khashane La M. Manamela

Introduction

 

[1]             The applicant, Amaanat Investment Holdings Limited, is a public company involved in property and related business. As a public company it is required by the provisions of section 61(7)(b)[1] of the Companies Act 71 of 2008 (the Companies Act) to hold an annual general meeting (AGM) every calendar year, but not more than 15 months from the date of its previous AGM. The applicant last held its AGM on 27 February 2020. This was in respect of the financial year which ended on 28 February 2019. The applicant submits that it has not been able to hold an AGM for the financial years ending 28 February 2020 and 28 February 2021. In this application an extension of the period for holding both AGMs is sought until 27 November 2021.

 

[2]             The main ground advanced for the application for an extension relates to the declaration of the national state of disaster in terms of the Disaster Management Act 57 of 2002 (Disaster Management Act) on 15 March 2020 by President Cyril Ramaphosa to combat the COVID-19 pandemic.[2] The declaration of the state of disaster was accompanied by restrictions on gatherings for both social or business purposes (the COVID-19 restrictions). Although the COVID-19 restrictions were eased with time, the applicant says it has still been unable to hold its AGM, hence this application.

 

Applicant’s case (i.e. grounds (for showing good cause) for extension of time for convening an AGM)

 

[3]             Section 61(7)(b) of the Companies Act provides that a public company which is unable to convene its AGM within the prescribed 15 months’ period after the date of its previous AGM, may approach this Tribunal for an extension of the time to hold its AGM. This Tribunal may on good cause shown by an applicant extend the time for an applicant company to hold its AGM.

 

[4]             The following are the grounds or the applicant’s case for an extension of the time to convene its AGM until 27 November 2021:

 

“3.

3.1.  The Applicant seeks an extension of time to convene its annual general meeting (“AGM”) in terms of section 61(7)(b) of the Companies Act 71 of 2008 (“the Act”) for the financial years ending 28 February 2020 and 28 February 2021, respectively, for a period of six months, on the grounds set out below.

 

3.2       The Applicant accordingly seeks the following administrative order:

 

(a)        the time for the Applicant to hold its AGM in respect of the financial year ending 28 February 2020, is extended until November 2021.

 

(b)        the time for the Applicant to hold its AGM in respect of the financial year ending 28 February 2021, is extended until 27 November 2021.

 

3.3       …

 

4.

4.1       The Applicant is the holding company, with some 33 subsidiaries (“the subsidiaries”), constituting the Amaanat Group. … The Amaanat Group was established in 1968 by a group of community leaders in Durban, KwaZulu-Natal, with a view to providing much-needed accommodation to the local community, as a response to the Group Areas Act of 1950, which prohibited “non-whites” from living on, or owning land in South Africa’s most developed and valuable areas. The Amaanat Group initially specialised in developing and leasing residential apartment blocks, and offered a means of saving and wealth-creation for small investors. Since 1968 to 2011, the Amaanat Group focused on developing and leasing mainly residential apartment blocks, and up until 2011, the Group had a portfolio of 9 properties, including 2 commercial developments.

 

4.2       The period between 2011 and 2019 saw the Amaanat Group experience exponential growth, with the value of its property portfolio increasing from about R250 million to approximately R4 Billion, now with some 6000 investors. The portfolio now includes Commercial, Industrial, Retail and Shopping Centre

developments across South Africa, in order to provide a market-related return to its approximately 6000 shareholders.

 

4.3       The Amaanat Group has no external borrowings. It is funded exclusively by shareholder loans.

 

Good Cause for Application

 

5.

5.1       The Applicant last held its Annual General Meeting for the financial year ending 28 February 2019 on the 27 February 2020. The next AGM, for the financial year ending 28 February 2020 should accordingly have been convened by no later than 27 May 2021 in order to meet the requirements of Section 61(7)(b) of the Act.

 

5.2       The Applicant respectfully submits that due to the Covid-19 pandemic as well as the subsequent national lockdown declarations, the Applicant’s business had to prioritise on the day-to-day running of the company whilst having limited skilled staff (due to the pandemic) at its disposal, with resultant constraints of capacity. This created a knock-on effect in causing delays in producing its audited financial statements for the immediately preceding financial year. Put differently, the Applicant has to prepare consolidated group financial statements, including information from the subsidiaries, which needs to be presented at the AGM.

 

5.3       Furthermore, the Applicant has over 6000 shareholders, and holding an AGM during the lockdown period would not have been in the shareholders best interests taking the following into consideration:

 

5.3.1     The restriction of public gatherings under the various lockdown levels to contain the spread of Covid-19;

 

5.3.2     The age group coupled with the co-morbidities of the some of the Applicant’s Board of Directors as well as many of its shareholders; and

 

5.3.3     Acting in the best interests of its shareholders during the pandemic, with the public’s health as its main priority.

 

5.4       Whilst the Applicant could have considered the possibility of holding a virtual AGM, it is significant that this would have been the first virtual AGM that it would have convened in its 53 year history and that the success of a virtual AGM might be uncertain as a substantial proportion of the Applicant’s shareholders also comprise of certain groups who are not technologically inclined, and thus might be unable to engage meaningfully with the Applicant’s Board of Directors, thereby preventing the Board from hearing the views of all its shareholders in a virtually convened AGM. The board of the Applicant, in an attempt to ensure that the principles of transparency and open communication are achieved at its AGM, had elected not to have a virtual AGM.

 

5.5       A copy of the Applicant’s Memorandum of Incorporation (as amended), is annexed hereto, marked … Part C of Schedule 4 thereof states that:

“No Shareholder shall be entitled to participate by electronic communication at any shareholders meeting, unless the board of directors shall in its sole discretion determine otherwise.”

 

5.6       Despite the unforeseen challenges that the Applicant had to endure, the Applicant continued at all material times to keep its shareholder apprised of all the matters affecting its financial position, shareholders returns, as well as all other material developments, through the electronic transmission of notices from time to time. A copy of all relevant communications sent via electronic transmission by the Applicant to its shareholders, since the inception of the Covid pandemic in South Africa (March 2020) to date of the application, is attached …

 

5.7       The Applicant respectfully submits that with the current ease in national lockdown restrictions and the expected recovery rate from Covid-19 infections, it should be in in a position to hold its next AGM for the financial year ending 28 February 2020 by no later than the 27 November 2021.

 

5.8       The Applicant respectfully submits that it would serve no real or practical purpose to refuse the Applicant the relief sought due to circumstances beyond its control, more particularly, the global pandemic, which has paralysed the world, with devastating consequences. The Applicant submits that the pandemic brought its fair share of challenges which factually led to unforeseen delays in hosting its AGM timeously. It makes business sense to have regard inter alia to considerations of health and convenience of the shareholders in the present challenging circumstances.”

 

[5]             The submissions quoted above are meant to establish good cause for the applicant to be granted an extension of time to hold its AGM until 27 November 2021. Next, I assess these submissions against the applicable legal principles.

 

Submissions and applicable legal principles (discussed)

 

[6]             Primarily the determination of this application is in terms of the provisions of section 61(7)(b) of the Companies Act, which reads:

 

“A public company must convene an annual general meeting of its shareholders-

(a) …

(b)   … 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.”

 

[underlining added for emphasis]

 

[7]             The applicant’s memorandum of incorporation or MOI and the certificate of confirmation issued by the Companies and Intellectual Property Commission or CIPC (included in the papers) confirm that the applicant, indeed, is a public company. This is also confirmed by the applicant’s registration number and the expression “Limited” or its abbreviated form “Ltd”.[3]

 

[8]             Section 61(7)(b) provides that a public company convene its AGMs not more than 15 months apart. As already stated, this period may be extended on application to this Tribunal in the event that - for whatever reason - a public company is unable to convene its AGM as stipulated by section 61(7)(b). To succeed, an applicant for an extension ought to show good cause.

 

[9]             The concept “good cause” is not explained in the Companies Act. To understand its meaning one has to have regard to the decisions of the Courts. For example, in the decision of Minister of Defence and Military Veterans v Motau and Others[4] (Motau) the Constitutional Court held as follows:

 

“Good cause may be defined as a substantial or 'legally sufficient reason' for a choice made or action taken. [Garner (ed) Black's Law Dictionary 8 ed (Thomson West, St Paul 2004) at 235] Assessing whether there is good cause for a decision is a factual determination dependent upon the particular circumstances of the case at hand. [See, for example, Union of Refugee Women and Others v Director: Private Security Industry Regulatory Authority and Others 2007 (4) SA 395 (CC) (2007 (4) BCLR 339; [2006] ZACC 23) (Union of Refugee Women) para 86] [5]

 

[underlining added for emphasis and material in accompanying footnotes reflected in square brackets, but the numbering of the footnotes omitted]

 

[10]       In The Highly Nutritious Food Company (Pty) Ltd v The Companies Tribunal and Others (Highly Nutritious Food),[6] the Johannesburg High Court held:

 

“Section 160(2)(b) allows any person and at any time to bring an application on good cause shown. This does not refer only to the delay in bringing the application but to show good cause as to why the application must be entertained. The section requires the applicant to furnish a reasonable explanation as to why the application should be entertained by the Tribunal. It does not require an explanation only as to the delay in bringing the application but refer to the merit of the application as well.”[7]

 

In Ahmed Al-Kadi Private Hospital Limited[8] (Ahmed Al-Kadi) I had the task of determining whether or not good cause was shown. Against the background of the abovementioned court cases, among others, I stated the following:

 

“[15]  But the dicta in Highly Nutritious Food, quoted above, is very useful for a determination to be made in this matter. The view expressed is that the decider of fact ought not only consider the reasonableness of the explanation proffered for the delay, but also the merits of the matter. The two are the inclusive ingredients of the concept of “good cause”.

 

[16] Consequently, blending … the dicta or views in Motau and Highly Nutritious Food above, one may say that establishing or showing “good cause” for purposes of the extension contemplated in section 61(7)(b) requires the applicant to furnish sufficient or substantial or reasonable explanation for the time-factor (or delay in convening an AGM) and meritorious ground for the extension sought from this Tribunal. There ought to be reasonable or substantial grounds for the extension and for the timing of the application.”[9]

 

[11]       The essence of what is stated above is that an applicant for an extension of the period to convene an AGM ought to have reasonable or substantial grounds for the extension and for the timing of the application.

 

Conclusion

 

[12]       As a sign of the times we currently live in, the applicant has exclusively cited reasons to do with the COVID-19 pandemic for an extension. It is submitted that due to the pandemic the applicant could not convene its AGM since the year ended 28 February 2020. The same applies for the AGM for the year ended 28 February 2021. The restrictions or restrictive measures imposed to combat the COVID-19 pandemic made it impossible for the applicant to hold its AGM for both years, especially given that the applicant has 6000 members. Meeting at one place under the environment of the COVID- 19 pandemic would have risked the lives of the applicant’s members, especially those with co-morbidities, it is further submitted. But one may be pardoned to ask why this application was not launched earlier, particularly for the year ended 28 February 2020.

 

[13]       Further, the board of directors of the applicant is empowered by the applicant’s MOI to convene or allow a meeting to be convened by means of electronic communication. This is restatement of section 63 of the Companies Act.[10] However, the applicant says that the high number of its membership made the electronic communication option impossible. Also, it would have been an unprecedented challenge for the applicant and some of its members to hold its AGM by means of electronic communication.

 

[14]       Despite some concerns raised above, I find that the abovementioned reasons given by the applicant constitute a “good cause”. Consequently, the application would succeed with an order made accordingly. However, I will grant the applicant a longer period than requested, due to the lapse of time since the filing of this application and this decision. Instead of extending the period to 27 November 2021, I will extend it to 28 February 2022. Obviously, the applicant is entitled to convene its AGMs sooner.

 

Order

 

[15]       On the basis of what is stated above, the following administrative order is made:

 

a)                the time for, Amaanat Investment Holdings Limited (registration number: 20[....]06), the applicant herein, to hold its annual general meeting of shareholders for the year ended 28 February 2020 is extended until 28 February 2022, and

 

b)                the time for, Amaanat Investment Holdings Limited (registration number: 20[....]06), the applicant herein, to hold its annual general meeting of shareholders for the year ended 28 February 2021 is extended until 28 February 2022.

 

 

Khashane La M. Manamela (Mr.) Member, Companies Tribunal

05 October 2021

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