Sammel and Others v President Brand Gold Mining Co Ltd

• Jurisdiction: South Africa

Sammel and Others v President Brand Gold Mining Co Ltd
1969 (3) SA 629 (A)

1969 (3) SA p629

Citation	1969 (3) SA 629 (A)
Court	Appellate Division
Judge	Steyn CJ, Van Blerk JA, Botha JA, Holmes JA and Trollip JA
Heard	February 17, 1969; February 18, 1969; February 19, 1969; February 20, 1969; February 21, 1969 ; February 22, 1969; February 23, 1969; February 24, 1969; February 25, 1969; February 26, 1969; February 27, 1969
Judgment	May 29, 1969

Flynote : Sleutelwoorde G

Company — Reconstruction of — Take-over scheme — Sec. 103 ter of Act 46 of 1926, as amended — 'Nominee' — Meaning of — Kinds of shareholders contemplated — Court endowed with a discretion — Extent of — Transferor company insolvent — Interest of creditors paramount — Scheme unfair — Onus of proof — Test — Circulars issued — Contents of — Must not be untrue — Effect of becoming a shareholder — Capital — Reconstruction of granted by Court — Minute registered — Effect — Sec. 49 (4) of Act — Majority of shareholders in transferor company need not be independent or disinterested in transferee company — Fairness of price for shares offered in transferor company — Determination of — Opposition to

1969 (3) SA p630

take-over — Several shareholders joining as plaintiffs — Action unsuccessful — Special order as to costs made — Appellate tribunal's refusal to interfere with Court's discretion exercised judicially — Interest on payment for shares by transferee company — Refusal of.

Headnote : Kopnota

A In terms of section 103ter of the Companies Act, 46 of 1926, as amended, which authorises a scheme or contract involving the transfer of shares in one company to another with the approval of the holders of not less than ninetenths in value of the shares whose transfer is involved (other than shares already held at the date of the offer by, or by a nominee for, the transferee company and its subsidiary), unless the B dissenting creditors make application to Court for an order otherwise, the word 'nominee' means an agent (and perhaps includes a trustee) for holding the shares of the transferee company. Consequently the only kinds of shareholders, subject to the control of the transferee company, whose acceptance the Legislature has seen fit to exclude, are the transferee company itself, its subsidiary, and their agent (or possibly trustee), holding shares in the transferee company for either of them.

Section 103 ter of the Act endows the Court with a wide discretion. It C enables it to 'order otherwise' on the application of a dissenting shareholder without expressing any criteria for so ordering. The criterion is the fairness or unfairness of the take-over scheme to the shareholders whose shares are involved, except that there might be 'special circumstances in special cases', in which, despite the fairness of the scheme, the Court should nevertheless order otherwise.

Generally the test of fairness means fairness to the shareholders as a D whole, but, where the transferor company is insolvent, the paramount consideration must be the rights, wishes and interests of the creditors and not of the shareholders.

Section 103 ter by its very terms imposes the onus of proving the unfairness of the scheme or other circumstances justifying the Court in 'ordering otherwise' on the dissenting shareholder applying for such relief.

Subject to section 64 (1) of the Act, the Act does not provide for the E disclosure of any information to shareholders by circular or otherwise about a proposed reduction or reconstruction of capital. Where, however, a circular is issued it must not be untrue in any material respect by reason of what is stated or omitted from it.

By becoming a shareholder in a company a person undertakes by his contract to be bound by the decisions of the prescribed majority of shareholders, if those decisions on the affairs of the company are F arrived at in accordance with the law, even where they adversely affect his own rights as a shareholder.

Where the Court has granted an order for the reconstruction of capital of a company and the minute has been registered by the Registrar of Companies then his certificate under section 49 (4) of the Companies Act, 46 of 1926, as amended, becomes for all purposes, including any purpose under section 103 ter, res judicata and must be accepted as the truth, i.e. that the reconstruction of capital has been duly effected. G Thereafter shareholders cannot maintain that the reconstruction plan was unfair to them as minority shareholders.

Section 103 ter of the Act does not require for its applicability that the holders of the nine-tenths majority of countable shares must be independent of or disinterested in the transferee company. If such a majority does accept a takeover offer made in pursuance of a scheme or contract the existence of any connection, interest or dependence between H that majority and the transferee company is merely a factor to be taken into account by the Court in exercising its discretion under the section, the weight to be given to it depending upon the circumstances of each case.

Section 103 ter of the Act does not require that the acceptance of an offer by those shareholders in the transferor company who are also shareholders in the transferee company should be disregarded: at most, that would be merely a factor which the Court might take into account in determining the fairness of the scheme or otherwise exercising its discretion under the section.

A Court exercising its equitable discretionary power under section 103 ter of the Act, in determining the fairness of the price offered must ordinarily take the value of the shares to the shareholders of the transferor company with its

1969 (3) SA p631

own profit potentialities as at the date of the take-over bid and not the value to the bidder with any special or added profit potentialities that the company will have in its hands.

Several dissident shareholders had joined in an action opposing the take-over under section 103 ter of the Act of the company by a transferee company. The trial Court had found that such take-over had A obtained the approval of the requisite majority and had been fair and reasonable, and had ordered the plaintiffs to pay the costs in the respective proportion of their shareholdings and had in addition ordered the first plaintiff 'to pay the costs awarded against each of the other plaintiffs, jointly and severally with such plaintiffs, the one paying the other to be absolved'. In an appeal,

Held, on the facts, that the appeal failed.

Held, further, in regard to the special order as to costs, as the trial B Court had exercised its discretion judicially, that the Appeal Court could not interfere. Held, further, in regard to a contention by the dissenting shareholders that they ought to have been granted interest on the amounts payable for their shares up to date of payment, that, as they had launched the proceedings and as section 103 ter (2) only obliged the transferee company to pay the amount owing for the shares to the transferor company after such proceedings had been disposed of, that no order for interest could be made.

The decision in Witwatersrand Local Division in Sammel and Others v. C President Brand Gold Mining Co. Ltd., confirmed.

Case Information

Appeal from a decision in the Witwatersrand Local Division (NICHOLAS, J.). Facts not material to this report have been omitted from the judgment of TROLLIP, J.A.

A. Suzman, Q.C. (with him E. Morris, S.C., and G. Gordon), for the appellants: Analysed into its component elements, sec. 103 ter of Act 46 of 1926 involves the following three stages: (a) a scheme or contract involving the acquisition by one company (the 'acquiring or transferee company') of the shares in another company (the 'transferor company'). E (b) The approval of the acquiring company's offer by the holders of not less than nine-tenths in value of the shares to be acquired. In computing the requisite majority there must be excluded any shares already held at the date of the offer (i) by the acquiring company itself; or (ii) by any subsidiary of the acquiring company; or (iii) by F nominees for the acquiring company or its subsidiaries. (c) A 'coercion' notice by the acquiring company to non-assenting shareholders that it desires to acquire their shares. The acquiring company thereupon becomes entitled (and bound) to acquire the shares of any non-assenting shareholders (on the terms on which, under the scheme or contract, the shares of the approving shareholders have been acquired) unless, on application to the Court by any non-assenting shareholder, the Court thinks fit to 'order otherwise'. D

G In the result, in its original form sec. 103 ter of the South African Act corresponds to sec. 155 of the English Act of 1929; while sec. 103 ter in its present form corresponds to sec. 209 of the English Act of H 1948. Identical or similar provisions are to be found in the legislation of various other countries, e.g.: Australia, Companies Act, 1936, sec. 135; Canada, The Companies Act, 1934, sec. 124; The Companies Act, 1952, sec. 128; Eire, Companies Act, 1963, sec. 204; New Zealand, Companies Act, 1955, sec. 208; Southern Rhodesia, Companies Act, 1951, sec. 164. There are various provisions in the South African and English Companies Act under which the shares of a dissenting minority may be compulsorily acquired. Such acquisition can be effected only with the express sanction of the Court and subject to various safeguards.

1969 (3) SA p632

See sec. 103, sec. 103 bis; Cilliers and Benade, Company Law (1968), pp. 251 - 264; Hahlo, Company Law Through the Cases, pp. 400 - 415; Henochsberg, Companies Act, 2nd ed., pp. 310 - 319; Pyemont, Company A Law, 6th ed., pp. 312 - 317; English Companies Act, 1948, secs. 206, 207, 208; Buckley, Companies Acts, 13th ed., pp. 402 -...