ALTERABLE AND UNALTERABLE PROVISIONS OF THE COMPANIES ACT 71 OF 2008: RECENT CASES EXPOSE INHERENT UNCERTAINTIES

• Date: 16 August 2019
• Published date: 16 August 2019

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ALTERABLE AND UNALTERABLE

PROVISIONS OF THE COMPANIES

ACT 71 OF 2008: RECENT CASES

EXPOSE INHERENT UNCERTAINTIES

HELENA STOOP

Lecturer in Law, University of Cape Town

I INTRODUCTION

The Companies Act 71 of 2008 (the Act) introduced various

mechanisms to ensure that the legislation adheres to the aims of

simplicity and flexibility espoused in s 7(b)(ii). One such device is

the use of ‘alterable’ and ‘unalterable’ provisions throughout the Act

which create a flexible ‘opt in/opt out’ regime (Farouk HI Cassim (ed)

Contemporary Company Law 2 ed (2012) 13). The concept is simple

enough. Companies are provided with a mandatory blueprint in the

form of the unalterable provisions contained in the Act. The flexibility

lies both in the fact that companies are able to deviate from a number

of legislative provisions in their Memoranda of Incorporation (the

alterable provisions) and in the fact that a company may add matters

not at all dealt with by the legislation as incorporators see fit.

In practice though, it would seem that the implementation of this

system might not be a seamless one and the relatively recent decision

of the Gauteng North High Court in Du Plessis v Clearwater Estates NPC

and Others (GNP) unreported case no 82306/2014 of 13 November

2015 and of the Western Cape Division in De Bruyn v Grandselect

101 (Pty) Ltd and Others (WCD) unreported case of 5 March 2014

illustrate the possible uncertainties that plague the application of the

provisions. This note will set out the relevant sections of the Act and

consider the facts and the decisions of the courts in the Du Plessis

and De Bruyn cases. The facts of these cases are undoubtedly only two

examples of several potential areas of contention. The main thesis

is that practitioners should beware of the impact of their choices

when drafting a company constitution and any ancillary documents

to avoid unintended consequences.

(2016) 2(1) JCCL&P 40

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