Ex parte Natal Coal Exploration Co Ltd

• Jurisdiction: South Africa
• Judge: Stegmann J
• Judgment Date: 15 March 1985
• Citation: 1985 (4) SA 279 (W)
• Hearing Date: 12 March 1985

Ex parte Natal Coal Exploration Co Ltd
1985 (4) SA 279 (W) [*]

1985 (4) SA p279

Citation	1985 (4) SA 279 (W)
Court	Witwatersrand Local Division
Judge	Stegmann J
Heard	March 12, 1985
Judgment	March 15, 1985

Flynote : Sleutelwoorde D

Company — Compromise — Scheme of arrangement in terms of s 311 of Act 61 of 1963 — A scheme which seeks to deprive a shareholder of his shares must, in order to qualify as an E "arrangement" in terms of s 311, substitute therefor something more than a cash payment.

Headnote : Kopnota

A shareholder is a participant in a risk venture embarked on with a view to making profits. He has the prospect that if profits are made a dividend may be paid. The prospect of a future stream of dividends may serve to enhance the capital value of his shares. He is entitled to annual financial F statements and other information. He has voting rights that can be used to influence the course of the company's business. An "arrangement" (in the context of a scheme of arrangement as contemplated by s 311 of the Companies Act 61 of 1963) in relation to rights of this kind must truly arrange such rights. A scheme that seeks to subvert all of such rights and to replace them with a mere cash payment and nothing remotely G resembling the rights in question is not an "arrangement" contemplated by s 311.

Case Information

Application for an order calling for a meeting of shareholders to consider a purported scheme of arrangement. The facts appear from the reasons for judgment.

S du Toit for the applicant. H

Cur adv vult.

Postea (March 15).

Judgment

I Stegmann J:

This is an application under s 311 of the Companies Act 61 of 1973. A director of the applicant company alleges that an arrangement is proposed between the company and what is said to be a class of its members. He moves the Court to order a meeting of the

1985 (4) SA p280

Stegmann J

A holders of some of the issued ordinary shares of the company (called "the scheme shares") to be summoned to vote on the proposal.

The question which I have to consider, is whether the proposal is one of an "arrangement" within the meaning of that term in the section. In his affidavit the director submits that it is.

The applicant company was incorporated in 1949, under the B Companies Act 1926. It has an authorised share capital of R15 000 000 divided into 30 000 000 ordinary shares of 50c each. Of such authorised shares, 25 000 000 have been issued and are fully paid up. They are listed on the Johannesburg Stock Exchange. Of such issued shares 23 197 236 (92,8%) are beneficially owned by Kangra Coal Corporation Ltd ("Kangra C Coal") and its subsidiaries. The remaining 1 802 764 issued shares (7,2%) are the scheme shares. They are registered in the names of some 1 450 other shareholders. The applicant company, it will be seen, is a subsidiary of Kangra Coal. The persons who are the directors of Kangra Coal are also the directors of the applicant company.

D The business of the applicant company is that of mining anthracite. It has two collieries in Natal. Most of the anthracite produced by the company is sold abroad, and exported from the Republic through the Richards Bay coal terminal.

The export of coal, including anthracite, is controlled by the Government. A permit is required. In the papers before me the E requisite Government permission is referred to as an "export allocation". Export allocations are associated with the capacity of the Railways and of the Richards Bay coal terminal to handle the coal which coal producers may wish to export.

The applicant company has no export allocation and no rights to F use the Richards Bay terminal. Kangra Coal and some of its wholly-owned subsidiaries hold export allocations and associated rights to use the coal terminal. They have made a portion of their export allocations and associated rights available to the applicant. That is how the applicant has managed until now to export the anthracite which it produces.

G The papers before me contain no explanation as to why the applicant company enjoys no export allocation of its own and no indication as to any prospect which the applicant may have, if it approaches the Government, of obtaining its own export allocation in the future. The present application evidently proceeds on the tacit assumption that the applicant is entirely H dependent on Kangra Coal and its wholly-owned subsidiaries for an export allocation and that there is nothing that can be done about that state of affairs. I do not know whether that unexpressed assumption is justified, or whether it is merely a reflection of the fact that the applicant company is controlled by Kangra Coal. It may be that it suits the convenience of I Kangra Coal to organise the affairs of its group in such a way as to leave the applicant company without any export allocation of its own.

The affidavit of the director supporting the application, after stating that the applicant company is dependent upon Kangra Coal, and the latter's wholly-owned subsidiaries, for export allocations and rights to use the Richards Bay coal terminal, J proceeds to justify the proposed scheme, which is the subject-matter of this application, in the following terms:

1985 (4) SA p281

Stegmann J

"6 (c)

Consequently, any future expansion of applicant's A business will depend entirely on additional export allocations and rights being made available to it by Kangra Coal and its subsidiaries, and which the latter can only do by reducing their own respective allocations and rights.

(d)

In those circumstances, applicant's directors, who are also the directors of Kangra Coal, consider that it must be in the interests of Natal Coal as a company to become a wholly-owned subsidiary of Kangra Coal, so that its business can be integrated and rationalised B with the future development and...