Electronic Mining Supplies CC v Mabelane No.

• Jurisdiction: South Africa
• Judge: JH Roelofse AJ
• Judgment Date: 28 February 2018
• Citation: 2018 JDR 0422 (MN)
• Docket Number: 807/2015

Roelofse AJ:

[1]

The applicant is a close corporation. The applicant has two members, Ms Zodwa Christina Mabelane (who passed away on 15 February 2015 ("the deceased")), and Ms Anelize Lowis. Ms Lowis alleges that the deceased resigned as a member of the applicant on 5 January 2015. The deceased passed away before the applicant has registered the applicant's amended founding statement to reflect the deceased's purported resignation as contemplated in section 15 of the Close Corporations Act, Act 69 of 1984 ("the Act").

[2]

The close corporation seeks relief in terms of prayers which it has formulated as follows:

'1.

That the above Honourable Court make a finding that the deceased lawfully resigned from the Close Corporation before passing away;

2.

That the above Honourable Court make an order in terms of Section 36(1)(d) of the Close Corporations Act 69 of 1984 that the deceased ceases to be a member of the Close Corporation;

3.

And\or that the Commissioner of Companies and Intellectual Property be ordered to remove the deceased as member of the Close Corporation;

4.

And\or in the alternative that the Executrix, being the First Respondent be compelled to sign documentation to affect the removal of the deceased as member of the Close Corporation;

5.

That the above Honourable Court make a ruling in terms of Section 36(2)(b) of the Close Corporations Act 69 of 1984 with regard to the disposition of the shares;

6.

And\or that the member\s of the Close Corporation can determine disposition of shares in terms of Section 37 of the Close Corporations Act 69 of 1984;

7.

That the value of the shares, if any, be determined;

8.

That the procedure for establishing the value of the shares be provided,

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if applicable;

9.

And\or that the payment of the value of the shares, if any be determined with the provisions of Section 39 of the Close Corporations Act".

[3]

The first respondent is the executrix of the deceased's estate. The deceased was the first respondent's mother. The other respondents did not participate in the lis.

[4]

The deceased held 51% membership interest in the applicant. Ms Lowis holds the remaining membership interest.

[5]

I shall briefly dispose of the relief sought in prayers 1 to 6 because, at the end of the hearing, the parties' counsel had no objection to the granting an order with reference to section 35 of the Act. I shall do so. Thereby, prayers 7 to 9 of the notice of motion are addressed. I nevertheless proceed to deal with prayers 1 to 6 of the notice of motion.

[6]

Prayer 1 is for a declaratory order that the deceased has "lawfully" resigned from the applicant. On 18 May 2015, the executrix's attorneys informed the applicant's attorneys that the deceased's alleged resignation is denied. A real dispute of fact was therefore foreshadowed in this letter. Notwithstanding this knowledge, the applicant approached the court on motion. [1] Real disputes of fact are not resolved on paper. [2] In any event, prayer 1 contemplates a declaratory order. [3] A declaratory order in this regard would have been incompetent as it would have been academic and would have had no practical effect as the deceased has passed away after her alleged resignation and before her resignation could be effected. The deceased's membership interest now falls to be dealt with in terms of section 35 of the Act.

[7]

Sections 33 to 37 of the Act provides for the acquisition and disposal of members' interest in a close corporation. Section 33 provides for the acquisition of a members' interest by a new member; section 34 provides for the disposal of an insolvent member's interest; section 34A provides for the attachment and sale in

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execution of a member's interest; section 35 provides for the manner in which a deceased member's membership must be dealt with by his/her executor [4] ; section 36 provides for the cessation of membership by an order of court; [5] and section 37 deals with other disposals of members' interest.

[8]

Section 36 of the Act empowers the court to make an order regarding the disposal of members' interest. [6] , Only a member of a corporation has locus standi to approach court for relief in terms of section 36. Ms. Lowis in not a party to the proceedings. It is the close corporation that approaches the court for relief. I alerted counsel appearing for the applicant, Mr. Groenewald, to this insurmountable obstacle for the applicant. The applicant abandoned the relief sought prayer 2. In the result, prayer 5, where reliance is also placed on section 36, must likewise fail.

[9]

It is not open to the applicant to rely on section 37 of the Act for no other disposition of the deceased's membership interest applies. Therefore, prayer 6 must fail.

[10]

Without establishing the relief in prayers 1, 2, 5 and 6, there is no basis for the granting of prayers 3 and 4. These prayers must therefore also fail. This leaves prayers 6 to 9. As aforesaid, the relief sought in these prayers is addressed in the order.

[11]

However, this is not the end of the matter. Judges are duty bound to uphold the law - they may not close their eyes to injustice for injustice must be confronted head-on and, decisively dealt with. I was alarmed because what emerged from the papers appeared to be a fronting practice. [7] Fronting is a crime. Rightly so. It is nothing else than a modern-day exploitation of people based on race and gender through the shameful abuse of a well-intended and lawful mechanism that was created with the noble objective of redressing the ills of our recent past, so movingly described by the Chief Justice His Lordship Mr Justice Mogoeng in VIKING PONY AFRICA PUMPS (PTY) LTD t/a TRICOM AFRICA v HIDRO-TECH SYSTEMS (PTY) LTD AND

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ANOTHER [8] as follows:

"One of the most vicious and degrading effects of racial discrimination in South Africa was the economic exclusion and exploitation of black people. Whether the origins of racism are to be found in the eighteenth and nineteenth century frontier or in the subsequent development of industrial capitalism, the fact remains that our history excluded black people from access to productive economic assets. After 1948, this exclusion from economic power was accentuated and institutionalised on explicitly racially discriminatory grounds, further relegating most black people to abject poverty. Driven by the imperative to redress the imbalances of the past, the people of South Africa, through their democratic government, developed, among others, the broad-based black economic empowerment programme. Although Viking was decided in the context of public procurement, I do not see why the principles in Viking should not also apply in other instances where reliance is placed upon certain levels broad-based black empowerment compliance in order to secure business, whether big or small, lucrative or not.

[12]

The Broad-Based Black Economic Empowerment Act 53 of 2003 ("the B-BBEE Act") commenced on 21 April 2004. The objectives of the B-BBEE Act are to facilitate broad-based black economic empowerment. [9]

[13]

On 24 October 2014 [10] , an amendment to the B-BBEE Act came into force. The B-BEE Act was enhanced in order to address fronting. The B-BBEE Act now includes a definition of a fronting practice; it established the Broad-Based Black Economic Empowerment Commission which has the power to investigate fronting practices; and, it criminalizes fronting.

[14]

In section 1 of the B-BBEE Act, a fronting practice is defined as follows:

"fronting practice' means a transaction, arrangement or other act or conduct that directly or indirectly undermines or frustrates the achievement of the objectives of this

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Act or the implementation of any of the provisions of this Act, including but not limited to practices in connection with a B-BBEE initiative—

(a)

in terms of which black persons who are appointed to an enterprise are discouraged or inhibited from substantially participating in the core activities of that enterprise:

(b)

in terms of which the economic benefits received as a result of the broad-based black economic empowerment status of an enterprise do not flow to black people in the ratio specified in the relevant legal documentation;

(c)

involving the conclusion of a legal relationship with a black person for the purpose of that enterprise achieving a certain level of broad-based black economic empowerment compliance without granting that black person the economic benefits that would reasonably be expected to be associated with the status or position held by that black person; or

(d)

involving the conclusion of an agreement with another enterprise in order to achieve or enhance broad-based black economic empowerment status in circumstances in which—

(i)

there are significant limitations, whether implicit or explicit, on the identity of suppliers, service providers, clients or customers;

(ii)

the maintenance of business operations is reasonably considered to be improbable, having regard to the resources available;

(ii)

the terms and conditions were not negotiated at arm's length and on a fair and reasonable basis;"

[15]

Section 13B of the B-BBEE Act established the Broad-Based Black Economic Empowerment Commission. The Commission has authority throughout the Republic. The Commission must oversee, supervise and promote adherence with the Act in the interest of the public. [11] Two of the further functions of the Commission are to receive...