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Published: 13 Jul 2012
|Winding-up of a company and close corporation under the new Companies Act|
In the matter of Budge & Others NNO vs Midnight Storm Investments 256 (Pty) Ltd and Others, the South Gauteng High Court recently considered an application for the winding-up of a company and close corporation under Section 81 (1)(d)(iii) of the New Companies Act 71 of 2008 (“the 2008 Act”).
In terms of that Section a court may order a solvent company to be wound-up if:
(d) The company, one or more directors or one or more shareholders have applied to the court for an order to wind-up a company on the grounds that –
(iii) It is otherwise just and equitable for the company to be wound-up...”
The court held that the “just and equitable” basis for the winding-up of a solvent company in terms of this section of the Act should not be restrictively interpreted and limited to circumstances referred to in the preceding sub-sections (see (d)(i) and (d)(ii)), as was contended by the respondents.
The court held that sub-section 1(d)(i) applied to a situation where the directors were deadlocked in the management of a company and subsection 1(d)(ii) applied to a situation where shareholders are deadlocked in voting power.
The court held that the legislature had now modified the judicially developed deadlock category that forms part of the just and equitable ground for the winding-up of a company and made its application subject to certain new requirements.
Because the applicants had proved to the court there existed a justifiable lack of confidence in the conduct of one of the directors and in the management of the affairs of the two corporate entities, the court ordered the winding-up of the company and close corporation at the instance of the applicants.
This is an interesting judgement in that the court has now indicated that the “just and equitable” ground for winding-up entities should be considered more broadly to also include deadlock situations.
Written by Leander Opperman – partner – Adams & Adams