Ex parte Premier Paper Ltd

• Jurisdiction: South Africa
• Judge: Coetzee J
• Judgment Date: 11 February 1980
• Citation: 1981 (2) SA 612 (W)
• Hearing Date: 05 February 1980
• Court: Witwatersrand Local Division

Coetzee, J.:

This is an application under the provisions of s 97 of the Companies Act 61 of 1973 for the confirmation of the terms upon

Coetzee J

which certain convertible cumulative preference shares were created and allotted in 1979, to which I shall simply refer as "the preference A shares". The relief sought by the applicant is contained in a draft order which was handed in, reading as follows:

"It is ordered that:

(1)

In pursuance of ss (1) and (2) of s 97 of the Companies Act 61 of 1973, as amended, the terms of the creation and allotment of 1 575 B 000 11,3 per cent convertible cumulative preference shares of R1 each by applicant in terms of special resolutions passed on 1 February 1979 and registered on 2 February 1979 and as set out in art 183 (b) (ii) (D).01 of applicant's articles of association are validated retrospectively to the date of the registration of those C special resolutions on the condition that the figure and word '12 (twelve)' in that article are replaced by the figure and word '6 (six)'.

(2)

A copy of this order be lodged forthwith with the Registrar of Companies."

The special resolution which amended the articles of association of the applicant so as to make the creation possible was taken on the same day D that it was resolved to create the shares. The first part of the special resolution reads as follows:

"Resolved that, subject to the passing and registration of special resolution No 11 passed on 1 February 1979, the authorised share capital of the company of R2 700 000, divided into 2 500 000 ordinary shares of R1 each and 100 000 5½ per cent cumulative preference shares of R2 each, be increased to R4 275 000, by the creation of 1 575 000 11,3 per cent E convertible cumulative preference shares of R1 each, carrying the special rights and subject to the special conditions set out in art 183 which was added to this company's articles of association by special resolution No 11 passed on 1 February 1979."

It will therefore be seen that the terms upon which these shares were F created are not contained in the special resolution that created them, but the articles of association were amended to provide for the terms on which such shares may be created. That is contained in the second part of the resolution headed "11. As a special resolution". In terms thereof an article numbered 183 is inserted after art 182. It is headed "183. Convertible cumulative preference shares", and its preamble reads as follows:

G "The following terms shall apply to the 1 575 000 convertible cumulative preference shares of R1 each created by the company in terms of special resolution No 1 passed on 1 February 1979",

and then follow five pages of the terms upon which these shares may be issued. One of the terms is the following:

"D

The holders of the convertible preference shares shall be entitled to receive notice of and to attend each general meeting of the company but shall not be entitled to vote at any such meeting unless -

.01

the cumulative preferential dividend payable to the holders of those shares in respect of any half-yearly period is in arrear for more than 12 (twelve) months, in which event the holder of each convertible preference share shall be entitled to vote on all resolutions to be proposed at that meeting."

This provision caused concern to the applicant's directors because it was recently pointed out to them that the words "12 (twelve) months" were in conflict with s 194 of the Companies Act, as amended, in terms

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of which the maximum permissible period for the suspension of voting A rights in question is six months. In effect, an amendment of article D.01 (supra) is being sought to conform to the six month period in s 194.

Section 193 (1) reads as follows:

"Subject to the provisions of ss 194 and 195, and to the exceptions stated in s 196, every member of a company having a share capital shall have a right to vote at meetings of that company in respect of each share held by him."

B Section 194 creates an exception to this right of a member only if the articles of the company contain a particular provision to this effect. Hence, if such provision does not exist in the articles, the substantive law contained in s 193 would apply from which there is no escape. The question...