Ben-Tovim v Ben-Tovim and Others

• Jurisdiction: South Africa
• Citation: 2001 (3) SA 1074 (C)

Ben-Tovim v Ben-Tovim and Others
2001 (3) SA 1074 (C)

2001 (3) SA p1074

Citation	2001 (3) SA 1074 (C)
Case No	1627/2001
Court	Cape Provincial Division
Judge	H J Erasmus AJ
Heard	March 15, 2001
Judgment	March 29, 2001
Counsel	P B Hodes SC (with him E Fagan) for the applicant.; D R Mitchell SC (with him S C Goddard) for the first respondent.; No appearance for the second and third respondents.; S F Burger SC (with him G Selikowitz) for the fourth respondent.

Flynote : Sleutelwoorde B

Company — Shares and shareholders — Shareholders — General meeting of shareholders — Powers of — Companies Act 61 of 1963, s 228(1) — Directors' decision to dispose of whole or substantially the whole of undertaking or assets of company requiring approval of shareholders in general meeting — Whether general meeting entitled to decide, rather than merely approve directors' decision, on such C disposal — Generally accepted that, if directors cannot or will not exercise powers vested in them, general meeting may do so — Where directors in deadlock, general meeting of shareholders entitled to adopt resolution in terms of which offer for acquisition of main business of company accepted. D

Company — Shares and shareholders — Shareholders — General meeting of shareholders — Powers of — Companies Act 61 of 1963, s 228(1) — Directors' decision to dispose of whole or substantially the whole of undertaking or assets of company requiring approval of shareholders in general meeting — Special resolution of company requiring written consent of holders of cumulative preference shares to such disposal cannot override s 228 — In any event, where holders of E cumulative preference shares voting in general meeting in favour of resolution on such disposal, insistence on written consent amounting to empty formality.

Company — Shares and shareholders — Shareholders — Rights and duties of — Voting in general meeting of shareholders — Shareholders not standing in fiduciary relationship to company — Thus not under duty to exercise vote in general meeting bona fide in interests of F company as whole — Right to vote attaching to share itself as incident of property — Shareholders entitled to exercise right in own interests — Director of company, in capacity as shareholder, entitled to act entirely in his or her own interests, without taking account of any conflicting interests, provided such director not guilty of fraud or G oppression of minority shareholders.

Company — Shares and shareholders — Shareholders — Unfairly prejudicial, unjust or inequitable conduct — Application for order in terms of s 252 of Companies Act 61 of 1973 — Application for order setting aside resolution adopted at general meeting of shareholders may properly be brought under s 252 — Grant of relief depending upon whether Court H considering it just and equitable to do so in circumstances of case and whether Court of view that relief would bring matters complained of to an end — Court to examine conduct itself and its effect on other members — Motive underlying conduct complained of relevant only as aid in deciding whether it was unfairly prejudicial, unjust or I inequitable and whether granting relief would be just and equitable.

Company — Shares and shareholders — Shareholders — Unfairly prejudicial, unjust or inequitable conduct — Application for order in terms of s 252 of Companies Act 61 of 1973 — Minority shareholders bound by decisions of prescribed majority if such decisions reached in accordance with law — J

2001 (3) SA p1075

Resolution approving sale of major asset or undertaking passed at properly convened general meeting of shareholders valid in absence of A evidence of improper conduct by shareholders whose vote decisive.

Company — Shares and shareholders — Shareholders — Unfairly prejudicial, unjust or inequitable conduct — Application for order in terms of s 252 of Companies Act 61 of 1973 — Conduct complained of must affect shareholder in his or her capacity as member of company concerned — Shareholder in company A complaining that resolution adopted B by majority in properly convened general meeting of shareholders depriving company A of its essential source of income and profit-generating capacity — However, in terms of company A's articles of association net profits after tax accruing, not to shareholders, but to company B, a wholly-owned subsidiary of company C C in which complaining shareholder holding 25% of ordinary shares — Conduct complained of thus not affecting shareholder in her capacity as member of company A.

Company — Shares and shareholders — Shareholders — Unfairly prejudicial, unjust or inequitable conduct — Application for order in terms of s 252 of Companies Act 61 of 1973 — Section 252(3) requiring that Court D be satisfied that it be just and equitable to come to shareholder's aid — Court has discretion to refuse relief even if shareholder satisfying requirements of ss (1) — Not just and equitable to parties if relief sought would not bring to an end matters complained of. E

Company — Directors and officers — Directors — Director acting in capacity as shareholder in general meeting of shareholders — In such capacity director entitled to exercise right to vote entirely in his or her own interests, without taking account of any conflicting interests, provided such director not guilty of fraud or oppression of minority shareholders.

Headnote : Kopnota

In terms of s 228(1) of the Companies Act 61 of 1973 'the directors of a company shall not have the power, save with the approval of a general meeting of the company', to dispose of the whole or substantially the whole of the undertaking or of the assets of the company. While it appears that the division of powers between the general meeting of shareholders of the company and the board of directors has swung between supremacy of the general meeting and F prominence of the articles of association, it has generally been accepted that, if for some reason the directors cannot or will not exercise the powers vested in them, the general meeting may do so. One reason for a board's being unable to exercise its powers is the existence of a deadlock between the directors. In this instance where, because of a deadlock between the only two directors of a company, they were unable to reach a decision on an offer for the acquisition of the G main business of the company, the Court held that the general meeting of shareholders had been entitled to resolve the deadlock by adopting a resolution accepting the offer. (At 1085I/J - 1086C/D and 1086F - F/G.)

A special resolution of a company, in terms of which the written consent of holders of cumulative preference shares is required for the disposal of the whole or substantially the whole of the undertaking or H assets of the company, cannot override s 228 of the Companies Act, which gives the shareholders in general meeting ultimate power to authorise or ratify such disposal. In any event, where the holders of the cumulative preference shares have voted in favour of a resolution for such disposal, insistence upon written consent thereto would amount to empty formality, particularly where, as in this instance, there was I a deadlock between the directors. (At 1086H/I - 1087A.)

The members of a company do not stand in a fiduciary relationship to the company. They are therefore not under a duty to exercise their votes bona fide in the interests of the company as a whole. The right to vote is attached to the share itself as an incident of property which may be exercised by the J

2001 (3) SA p1076

shareholder in his or her own interests. A director of a company, in his or her capacity as a A shareholder of the company, may act entirely in his or her personal interest, without taking account of any conflicting interests, provided he or she is not guilty of fraud or of oppression of minority shareholders. (At 1088D - G.)

An application for an order setting aside a resolution adopted at a general meeting of shareholders may properly be brought under s 252 of the Companies Act (providing for a member's remedy in the case of B oppressive or unfairly prejudicial conduct), but the grant of relief in any particular case will depend upon whether the Court considers it 'just and equitable' to do so in the circumstances of the case and whether it is of the view that the relief would bring 'to an end the matters complained of' (ss (3)). (At 1091A - B/C.) In applying the section the Court must look at the conduct itself and its effect on the C other members of the company. The motive underlying the conduct is relevant only as an aid in deciding whether the conduct complained of is 'unfairly prejudicial, unjust or inequitable' and whether the grant of relief would be 'just and equitable'. (At 1091E - F.)

It is trite that the minority is bound by the decisions of the prescribed majority of shareholders if those decisions are arrived at in accordance with the law. Thus, a resolution approving the sale of D the major asset or undertaking of a company passed at a properly convened meeting of shareholders, with no evidence of any improper conduct by the shareholder whose vote was decisive, is valid. (At 1092F - G/H.)

The conduct which a shareholder complains of in an application for relief under s 252 must be conduct which affects the shareholder in his or her capacity as a member of the company. Where, as in the E present instance, a share- holder in company A complained that a resolution by a majority of shareholders in a properly convened meeting of its shareholders deprived the company of its essential source of income and profit-generating capacity, but in terms of its articles of association its net after tax profits accrued, not to the shareholders, but to company B, a wholly-owned subsidiary of company C...