Ex parte Provisional Liquidator Hugo Franco (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Marais J
• Judgment Date: 22 August 1958
• Citation: 1958 (4) SA 397 (W)
• Hearing Date: 19 August 1958
• Court: Witwatersrand Local Division

Marais, J.:

This is an application by a provisional liquidator for leave B to call meetings to consider an offer of compromise. The Company in question is Hugo Franco (Pty.) Ltd., a company that was placed under provisional liquidation on the 8th July, 1958. The return day has been extended until to-day.

It appears from the papers that an offer was made first of all by the Company to pay the costs of liquidation and the costs of these C proceedings, as well as all preferent and secured claims in full, and to pay to all concurrent creditors of the Company, other than the shareholders and directors, an amount equivalent to 4s. in the £ on the claims of each of them.

On the matter being first heard, the presiding Judge requested further particulars with regard to the identity of the person or persons D guaranteeing the proper performance of this offer, if accepted by the creditors. Thereupon a new offer was made, guaranteed by Mr. George Franco, whose financial ability to carry out the guarantee, if called upon, has been proved by a bank guarantee filed in the papers, and by other evidence.

E The offer seems to be for the benefit of the creditors, and one which they may properly consider, and possibly accept. There is, therefore, no difficulty with regard to giving leave for the meetings to be called.

The only difficulty which arises at this stage is the condition precedent incorporated in the offer, as guaranteed by Mr. Franco, and that is that the share capital of the company be reduced. The position F at present is that the company has a share capital of £7,000 issued and fully paid up and a further unissued capital to the amount of £1,000. It is one of the terms of the offer and the guarantee that the Court, when sanctioning the compromise ultimately, if it does so, should also sanction a reduction in the capital from the sum of £8,000 to the sum of £10 0s. 0d.

G That matter is not immediately before the Court, because it is really the Court considering the report of the chairman of the meetings to be called, which will have to consider whether or not a reduction of capital can take place in the circumstances of the present case. But in order to sanction the meetings it is necessary to consider whether or H not there is any possibility of the Court ultimately sanctioning a reduction in capital.

Now the section in the Companies Act of 1926 which deals with the reduction of capital is sec. 44, the opening words of which are as follows:

'Subject to confirmation by the Court, a company limited by shares, if so authorised by its articles, may by special resolution reduce its share capital in any way.'

Marais J

It is suggested that the word 'by special resolution' precludes a provisional liquidator from approaching the Court for a reduction of capital, and...