CDH Invest NV v Petrotank South Africa (Pty) Ltd and Others

• Jurisdiction: South Africa
• Judge: Ponnan JA, Saldulker JA, Davis AJA, Carelse AJA and Rogers AJA
• Judgment Date: 01 April 2019
• Citation: 2019 (4) SA 436 (SCA)
• Docket Number: 483/2018 [2019] ZASCA 53
• Hearing Date: 01 April 2019
• Counsel: BH Swart SC (with JL Mÿburgh) for the appellant. S Kuny SC (with T Mamanyuha) for the respondents.
• Court: Supreme Court of Appeal

Carelse AJA C (Ponnan JA, Saldulker JA, Davis AJA and Rogers AJA concurring):

[1] This appeal concerns a decision adopted by written consent of the majority of the directors in terms of s 74 of the Companies Act 71 of 2008 D (the Act). [1]

[2] The appellant (CDH) and the second respondent (Amabubesi) hold all the issued shares in the first respondent (Petrotank) in a 60/40 ratio. There are 100 000 issued shares. This was in accordance with a shareholders' agreement (styled a MOI – MOU) concluded between the E parties in January 2013. However, Petrotank's memorandum of incorporation (MOI) of February 2013 mistakenly recorded the number of authorised shares as 1000. CDH sought an order in terms of s 61(12) of the Act directing the board of Petrotank to convene a shareholders' meeting in terms of s 61(3) of the Act for the purpose of considering and F passing five resolutions: (1) the removal of a director; (2) the election of a substitute director; (3) instructing the board to demand that the minority shareholder, Amabubesi, pay Petrotank R1 million; (4) instructing the board to sue Amabubesi for this amount; and (5) instructing the board to consider a pro rata rights offer of 98 835 ordinary no par value shares.

[3] G Amabubesi consented to the first two resolutions. Although the court a quo (Van der Linde J) dismissed the application in respect of the three remaining resolutions, the appeal to this court only concerns the dismissal of the application in respect of the fifth resolution. [2] Van der Linde J also upheld a counter-application by Amabubesi to invalidate a director's round robin resolution of Petrotank passed on 31 March 2014 H that purported to amend its MOI by increasing the number of

Carelse AJA (Ponnan JA, Saldulker JA, Davis AJA and Rogers AJA concurring)

authorised shares from 1000 to 1 000 000. The declaration of invalidity A of the increase of the authorised shares to 1 000 000 shares had the consequence that there were no additional authorised shares that could be utilised to conduct a rights offer.

The facts B

[4] In 2013 CDH, a Belgian company, and Amabubesi, an empowerment company, caused Petrotank, a partnership vehicle, to be incorporated. Petrotank's business included the manufacture of steel and petroleum storage tanks. The MOU provided that there would be five directors, three appointed by CDH and two by Amabubesi. At all material times the directors appointed by CDH were Messrs D'Hondt, Mabale, and Stadler as C managing director. The directors appointed by Amabubesi were Messrs Moyo and Ntsaluba. Petrotank appointed Lucro Auditing as its auditors.

[5] Due to an error on the part of the person responsible for the incorporation of Petrotank, its MOI recorded that it had authorised shares of 1000 ordinary no par value shares rather than 100 000. At the time D CDH and Amabubesi were unaware of this error.

[6] On Tuesday 25 March 2014, Moyo, of Amabubesi, met with Stadler and Mabale, to discuss the business of Petrotank. On Wednesday 26 March 2014 Moyo sent an email to Stadler and Mabale confirming what was discussed at the meeting. E

[7] On Friday 28 March 2014 at 15h49 Stadler sent a detailed email to his fellow Petrotank directors in which he dealt extensively with the meeting of 25 March 2014. The email concluded:

'Please also note that it came to my attention that Petrotank is in breach of the Companies Act, in that more shares are in issue than have been F authorised. In order to rectify this position, I attach hereto various documents (including a directors' resolution aimed at putting the Company on the right side of the Companies Act).

Therefore please tend [sic] to signature and return of the attached resolution, in order for us to rectify the situation.' G

There is no explanation as to how, when or why this breach came to his attention.

[8] Attached to this email was a directors' round robin resolution in terms of s 74 of the Act. The relevant portion of the resolution reads:

'Whereas the Company is, via its Memorandum of Incorporation, H authorised to issue no more than 1000 (one thousand ordinary) no par value shares; and

Whereas the current shareholders of the Company have agreed that 100 000 (one hundred thousand) shares will be issued amongst them (in a 60 000/40 000 split); and

Whereas it is a legal requirement, to ensure compliance with the Act as I relates to authorised and issued shares that the Company's number of authorised shares be increased and the Company's Memorandum of Incorporation be subsequently and accordingly amended;

Now therefore be it resolved that, in terms of sections 36(2)(b) and 36(3) of the Act, the board herewith increases the Company's number J

Carelse AJA (Ponnan JA, Saldulker JA, Davis AJA and Rogers AJA concurring)

of A authorised shares to such an extent that the Company is authorised to issue no more than 1 000 000 (one million) ordinary no par value shares; and

Be it further resolved that, in terms of section 16(1)(b) of the Act, the Company's Memorandum of Incorporation be amended so as to delete and replace the current wording of clause 2.1(1) (but specifically B excluding its sub-clauses (a) to (c) which remain) of the Memorandum of Incorporation with the following wording:

"The Company is authorised to issue no more than 1 000 000 (one million) ordinary no par value shares, and each such issued share entitles the holder to — . . . ." '

[9] C On the same day at 22h05 Ntsaluba sent an email...