REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG LOCAL DIVISION, JOHANNESBURG
(1) REPORTABLE: YES (2) OF INTEREST TO OTHER JUDGES: YES (3) REVISED: YES 4 July 2025 DATE SIGNATURE [1]
Case Number: 2021/30511
[1]
In the matter between:
In the matter between:
ENYUKA PROP HOLDINGS (PTY) LIMITED Applicant
and
UNITED MERCHANTS CC (IN LIQUIDATION) First Respondent
KOBUS VAN DER WESTHUIZEN N.O. Second Respondent
TALHA MOOIN MAYET N.O. Third Respondent
MASTER OF THE HIGH COURT, JOHANNESBURG Fourth Respondent
COMPANIES AND INTELLECTUAL PROPERTIES
COMMISSION Fifth Respondent
TRUVAL MANUFACTURERS CC Intervening party
In re:
ENYUKA PROP HOLDINGS (PTY) LIMITED Applicant
and
UNITED MERCHANTS CC Respondent
Flynote : Sleutelwoorde
Section 66(1) of the Close Corporations Act 1984 - voluntary and compulsory winding-up of insolvent close corporations – in terms of section 66(1) of the Close Corporations Act 1984, read with Item 9 of Schedule 5 to the Companies Act 2008, winding-up of insolvent corporations regulated by Chapter XIV of the Companies Act 1973, read with section 69 of the Close Corporation Act.
Companies Act 61 of 1973 – extent of current application in respect of liquidations – Item 9 of Schedule 5 to Companies Act 2008 – on proper interpretation the entire Companies Act 1973 remains in operation to the extent necessary for the application of Chapter XIV of the Companies Act 1973 – sections 199 and 200 remain in force for purposes of application of Chapter XIV.
Voluntary winding-up of insolvent close corporations – general procedure - after amendment of section 67 of the Close Corporation Act, voluntary winding-up of insolvent close corporations to be effected in terms of section 349, 450 and 351 of the Companies Act 1973, by special resolution.
Section 199 Companies Act 61 of 1973 - special resolutions for voluntary winding-up of close corporations – required level of assent - in terms of section 199 Companies Act 61 of 1973, subject to 25% quorum requirement, assent of 75% of the members present, or upon a poll being demanded, assent of 75% of the voting rights of members present required - unanimous decision by all members no longer required. However, the provisions of section 363(4) of the Companies Act 1973, requires all members to sign an affidavit confirming a statement of affairs in support of the special resolution.
Section 199 Companies Act 61 of 1973 - special resolutions for voluntary winding-up of close corporations – meeting requirements – meeting at which special resolution adopted to comply with section 199 of the Companies Act 1973, i.e., 21 clear days’ written notice to be given in terms of section 199(1) alternatively all the members must sign a written consent for meeting to be held on short notice in terms of section 199(3A).
Section 363 of the Companies Act 1973 – requirements for special resolution for voluntary winding-up – provisions of section peremptory – non-compliance resulting in voidness of resolution – registration of non-compliant special resolution invalid.
Section 354 of Companies Act 1973 – setting aside of voluntary winding-up – court’s approach towards application – primary question is whether the statutory requirements for a voluntary winding-up had been complied with, and whether the winding-up should have commenced at all - if the requirements have not been met, there would be no need to show any exceptional circumstances to set the winding-up aside. In reality, in such a case, although the result may be that the winding-up is set aside, the legal act underpinning the winding-up, being the special resolution, is found to be wanting, is declared void ab initio, and is set aside - this is not a discretionary remedy; the question is, objectively, whether there was compliance with the requirements or not.
Section 354 of Companies Act 1973 – setting aside of voluntary winding-up – court’s approach towards application – if statutory requirements complied with - the test laid down for the setting aside a winding-up under s 354, on the basis of subsequent events by the SCA, is whether the applicant has proved facts that show that it is unnecessary or undesirable for the winding-up to continue – exceptional circumstances required – test similar to test for setting aside of compulsory liquidations.
Headnote : Kopnota
In this application for the setting aside of a special resolution for the voluntary winding-up of an insolvent close corporation, United Merchants CC (“United”) and the setting aside of the winding-up in terms of section 354 of the Companies Act 1973, as well as the compulsory winding-up of the close corporation, the applicant, Enyuka Prop Holdings (Pty) Ltd (“Enyuka”), initially brought an application for the winding up of United, on the basis of its inability to pay its debts, which included a substantial amount of rent owing to Enyuka and other lessors. This application was opposed by United, which was clearly unable to pay its debts and substantially insolvent, on nebulous grounds. The opposition was a delaying tactic.
United was controlled by its two members, Messrs Steiner and Burkin, who were simultaneously in control of the intervening party, Truval Manufacturers CC (“Truval”), of whom they were also the members. United was allegedly indebted to Truval in the amount of R56 million for merchandise sold to it by Truval. Shortly prior to the launching of the liquidation application, which was issued on 25 June 2021, United made substantial payments to Truval, during March 2021 which evidently preferred Truval over other creditors. Also, during March 2021 United caused to be registered a general notarial bond in favour of Truval. As United and Truval are controlled by the same members, the pledge provided for in the notarial bond could have been perfected by consent. Instead, Truval brought and urgent application in this court for permission to perfect the pledge and obtained an order during April 2021. Shortly thereafter Truval allegedly took possession of United’s assets and business in terms of the order. The obtaining of the order was evidently a collusive abuse of the process of court with the aim of preventing the aforesaid dispositions to be regarded as dispositions in terms of the Insolvency Act (the Act excludes dispositions in compliance with a court order from the definition of “disposition”) and part of a fraudulent scheme directed at preferring Truval over other creditors.
While the opposed liquidation application was pending and United was obliged to deliver heads of argument, on 6 December 2021 United surreptitiously purported to adopt a special resolution for its winding-up by creditors and caused such resolution to be registered by the CIPC on 2 February 2022, thereby ostensibly placing United in voluntary winding-up. Only about a month later did United’s attorney of record (who also acts for Truval herein) inform Enyuka’s attorneys of the voluntary liquidation.
Thereafter, Enyuka launched the present application for an order declaring the special resolution and its registration void ab initio and for the setting aside of the voluntary winding-up in terms of section 354 of the Companies Act 1973. It also sought a compulsory winding-up of United pursuant to the initial application for winding-up of United.
Enyuka contended that the special resolution was fatally defective, as the resolution indicated that the notice of the meeting to all the members was attached to the resolution, while it was not, leading to the conclusion that no notice was given and that all the members did not participate in the meeting. It was contended that the resolution was void for that reason.
Enyuka also contended that the special resolution was also fatally defective because of non-compliance with the requirements of section 363 of the Companies Act 1973, which required the special resolution to be supported by a statement of affairs in the prescribed form, confirmed by way of an affidavit by all the members of the corporation. The statement of affairs was grossly deficient in a number of respects and not confirmed by any affidavit.
Enyuka also contended that the voluntary winding-up was part of a fraudulent scheme by United and Truval to manipulate the commencement date of the winding-up (by causing the commencement date to be 2 February 2022 instead of 25 June 2021), with the aim of placing Truval in a more advantageous position relating to the aforementioned impeachable transactions.
Truval contended that the flaws in the special resolution were mere “imperfections” which did not result in the invalidity of the resolution and its registration. Truval also denied perpetrating a collusive scheme to prefer itself above other creditors and contended that the setting aside of the voluntary winding-up would prejudice it, as it would deprive Truval of the advantages of the voluntary winding-up.
Held, that in terms of section 66(1) of the Close Corporations Act 1984, read with Item 9 of Schedule 5 to the Companies Act 2008, winding-up of insolvent corporations is regulated by Chapter XIV of the Companies Act 1973, read with section 69 of the Close Corporation Act.
Held, that on a proper interpretation of Item 9 of Schedule 5 to the Companies Act 1973 the entire Companies Act 1973 remained in operation to the extent necessary for the application of Chapter XIV of the Companies Act 1973.
Held, that sections 199 and 200 remained in force for purposes of application of Chapter XIV of the Companies Act 1972.
Held, that after amendment of section 67 of the Close Corporation Act by the Companies Act 2008, voluntary winding-up of insolvent close corporations must be effected in terms of section 349, 450 and 351 of the Companies Act 1973, by special resolution.
Held, that in terms of section 199 of Companies Act 61 of 1973, subject to a 25% quorum requirement, the assent of 75% of members present, alternatively if a poll is demanded, the assent of 75% of members’ voting rights is required for special resolutions for voluntary winding-up of insolvent close corporations. A unanimous decision by all members of the corporation (previously required by section 67 before it’s amendment) is no longer required. However, in the case of a close corporation, the provisions of section 363(4) of the Companies Act 1973, requires all members to sign an affidavit confirming a statement of affairs in support of the special resolution.
Held, that meeting at which special resolution adopted by close corporation had to comply with section 199(1) of the Companies Act 1973, meaning that 21-days written notice had to be given to the members of the meetings, alternatively the all the members had to sign a written consent in terms of section 199(3A), consenting to the meeting without the required 21-days’ notice.
Held, that requirements for special resolution for voluntary winding-up contained in section 363 of the Companies Act 1973 are peremptory and that non-compliance resulting in voidness of resolution and registration thereof invalid.
Held, that the primary question in an application for the setting aside of a voluntary winding-up in terms of section 354 of Companies Act 1973 is whether the statutory requirements for a voluntary winding-up had been complied with, and whether the winding-up should have commenced at all. If the requirements have not been met, there is no need to show any exceptional circumstances to set the winding-up aside. In reality, in such a case, although the result may be that the winding-up is set aside, the legal act underpinning the winding-up, being the special resolution, is found to be wanting, is declared void ab initio, and set aside. This is not a discretionary remedy; the question is, objectively, whether there was compliance with the requirements or not.
Held, that if the statutory requirements for a voluntary winding-up were complied with, the test laid down for the setting aside a winding-up under s 354 of the Companies Act 1973 is whether the applicant has proved facts that show that it is unnecessary or undesirable for the winding-up to continue and that exceptional circumstances exist. The test is similar to test for setting aside of compulsory liquidations. This would also apply to both circumstances leading up to the taking of the special resolution and circumstances that arose after the winding-up commenced.
Held, that the special resolution in casu did not comply with section 200 of the Companies Act 1973, in that the notice convening the meeting of members (i.e. a 21-day notice in terms of section 199(1)) was not attached to the resolutions, nor was any written consent for the meeting to be held in the absence of such 21-day notice in terms of section 199(3A) attached, as required by section 200(1). As such the resolution was fatally defective and void.
Held, that the statement of affairs in support of the special resolution failed to comply with section 363 of the Companies Act 1973 in that grossly incorrect and incomplete information was reflected therein, and it was not supported by any affidavit. This non-compliance rendered the statement of affairs and the special resolution fatally defective and void.
Held, that the contention that the defects in the special resolution were mere “imperfections” which did not render the resolution void ab initio, rejected.
Held, that the CIPC should not have registered the special resolution, which was clearly invalid, and that the voluntary winding-up of United should never have commenced on 2 February 2022.
Held, that for this reason the special resolutions and its registration was void ab initio and should be set aside.
Held, that Truval and United clearly collusively attempted to manipulate the date of commencement of the liquidation with the aim of perpetrating a fraud on the creditors of United, by intentionally and collusively preferring Truval above other creditors. This constitutes a reason why the voluntary winding-up of United should not continue and constitutes exceptional circumstances.
Held, that Truval’s contention that the winding-up should not be set aside, because it would allegedly prejudice Truval, rejected.
Held that the contention that Enyuka was no longer a creditor of United, because its claim prescribed while this application was pending, and no longer has locus standi, rejected.
Held, that the voluntary winding-up should be declared void ab initio and also set aside in terms of section 354.
Held, that the compulsory winding-up of United should be granted, with the commencement date of such winding-up being 25 June 2021.
Held, that Truval’s conduct was reprehensible and that a special cost order should be granted against it.
Cases Considered
Annotations
Reported cases
Afrisam (South Africa) Proprietary Limited v Maleth Investment Fund Proprietary Limited 2019 JDR 2519 (SCA): referred to
Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T): applied
Body Corporate Santa Fe Sectional Title Scheme NO 61/1994 v Bassonia Four Zero Seven CC 2018 (3) SA 451 (GJ): applied
Boschpoort Ondernemings (Pty) Ltd v Absa Bank Ltd 2014 (2) SA 518 (SCA); referred to
Botha NO v Van den Heever NO 2012 JDR 1202 (GNP): referred to
Carstens v Millennium Clutch Manufacturing (Pty) Ltd 2016 JDR 1868 (GJ): applied
C Pro Construction (Pty) Ltd v Caliber Devco CC 2018 JDR 1527 (GP); applied
Commissioner, South African Revenue Service v Nyhonyha and Others 2023 (6) SA 145 (SCA): applied
Development Bank of Southern Africa Ltd v Van Rensburg and Others NNO 2002 (5) SA 425 (SCA): referred to
Eskom v Soweto City Council 1992 (2) SA 703 (W): applied
Estate Obermeyer v Estate Wolhuter 1928 CPD 32: referred to and distinguished
Ex parte Strip Mining (Pty) Ltd: In re Natal Coal Exploration Co Ltd (In Liquidation) (Kangra Group (Pty) Ltd and Another Intervening) 1999 (1) SA 1086 (SCA): applied
Herbst v Hessels NO en Andere 1978 (2) SA 105 (T): applied
Kalil v Decotex (Pty) Ltd and Another 1988 (1) SA 943 (A): applied
King Pie Holdings (Pty) Ltd v King Pie (Pinetown) (Pty) Ltd; King Pie Holdings (Pty) Ltd v King Pie (Durban) (Pty) Ltd 1998 (4) SA 1240 (D): referrred to
Metro Western Cape (Pty) Ltd v Ross 1986 (3) SA 181 (A): followed
Misnun's Heilbron Roller Mills Holdings (Pty) Ltd v Nobel Street Central Investments (Pty) Ltd 1979 (2) SA 1127 (W): applied
Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA): applied
Santino Publishers CC v Waylite Marketing CC 2010 (2) SA 53 (GSJ): applied
Scania Finance Southern Africa (Pty) Ltd v Thomi-Gee Road Carriers CC and Another 2013 (2) SA 439 (FB): applied
Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd 1995 (4) SA 510 (C); dictum at 557D to 558A discussed and not followed
Standard Bank of South Africa Ltd v Oneanate Investments (Pty) Ltd (In Liquidation) 1998 (1) SA 811 (SCA): applied
Steenkamp and Others v Edcon Ltd 2016 (3) SA 251 (CC): applied
Suid-Afrikaanse Nasionale Lewensassuransiemaatskappy v Rainbow Diamonds (Edms) Bpk en Andere 1982 (4) SA 633 (C): followed
Trinity Asset Management (Pty) Ltd v Grindstone Investments 132 (Pty) Ltd 2018 (1) SA 94 (CC): followed
Unlawful Occupiers, School Site v City of Johannesburg 2005 (4) SA 199 (SCA): applied
Van der Merwe v Duraline (Pty) Ltd [2013] ZAWCHC 213: applied
Ward and Another v Smit and Others: In re Gurr v Zambia Airways Corporation Ltd 1998 (3) SA 175 (SCA): applied
Wild & Marr (Pty) Ltd v Intratek Properties (Pty) Ltd 2019 (5) SA 310 (GJ): applied
Statutes Considered
Companies Act 61 of 1973, ss 199, 200 and Chapter XIV
Close Corporations Act 69 of 1984, ss 26, 48, 66, 67 and 69
Companies Act 71 of 2008, ss 79, 80, 81, 82 and Item 9 of Schedule 5
Constitution of the Republic of South Africa, 1996, s 34
Order
The following order is hereby granted:
1. The special resolution for the voluntary liquidation of the first respondent, United Merchants CC (registration number 1993/013877/23) dated 6 December 2021, including the statement of affairs ("CRS(a)" and "CRS(b)" to the founding affidavit) and the registration thereof with the fifth respondent on 2 February 2022 is declared to be void ab initio;
2. In terms of section 354 of the Companies Act 61 of 1973 the voluntary liquidation of the first respondent pursuant to the registration of the special resolution ("CR5(a)" to the founding affidavit) is hereby set aside;
3. The appointment of the second and third respondents as the joint liquidators of the first respondent is declared void ab initio and set aside;
4. The first respondent, United Merchants CC (registration number 1993/013877/23), is placed under winding-up in the hands of the Master of the High Court;
5. It is declared that that the winding-up ordered above commenced on 25 June 2021 in terms of section 348 of the Companies Act, 1973;
6. The fourth respondent is directed to appoint a provisional liquidator or liquidators for the first respondent;
7. The fourth and fifth respondents are ordered to adjust their records to reflect the consequences of the orders above;
8. The second and third respondent are ordered to deliver upon demand all records in respect of the first respondent, and make payment, without deduction, of all funds held by them in the winding-up that was declared void and set aside in terms of this order to the provisional or final liquidators appointed pursuant to this order;
9. The intervening party, Truval Manufacturers CC, is ordered to pay the costs of this application on the attorney and client scale, including the cost of counsel on Scale C, including all costs that were reserved in this matter.
Judgment
D Marais AJ:
The current application for the setting aside of a voluntary winding-up
[1] This is an application by Enyuka Prop Holdings (Pty) Ltd (“Enyuka”), in terms of section 354 of the Companies Act 61 of 1973 (“the CA (1973)”) for the setting aside of a voluntary creditors’ winding-up of United Merchants CC (“United”). This application is not opposed by the liquidators of United, who are the second and third respondents herein, but is only opposed by the Intervening Party, Truval Manufacturers CC (”Truval”), who obtained leave to intervene in this application from this court.
[2] The voluntary liquidation of United purportedly commenced on 2 February 2022 when a purported special resolution by its members was registered by the Companies and Intellectual Properties Commission (“the CIPC”), while an application for the winding-up of United by Enyuka, which was first presented to this court on 25 June 2021, was pending and preparations were made to place the matter on the opposed motion roll for hearing, under the circumstances set out hereunder.
[3] The current dispute centres around the deemed date of United’s liquidation, which may have material effect on the rights of the parties in the liquidation. If an order would have been granted on Enyuka’s application, the deemed date of liquidation would have been 25 June 2021.1 However, if United is voluntarily liquidated by the registration of a special resolution, the date of commencement of liquidation would be (and currently is) the date of the registration by the CIPC of the special resolution2, being 2 February 2022.
[4] It is entirely possible that an order may be granted placing United in compulsory liquidation, despite the existing voluntary winding-up3, in which event the deemed date of commencement of liquidation would remain the date of the registration of the special resolution placing the corporation involuntary winding up for purposes of application of the law of insolvency.4
[5] However, if the voluntary winding-up is set aside, as is possible under section 354 of the CA (1973), and a compulsory winding-up order granted by the court, the date of commencement of the winding-up will be the date of presentation of the application for the compulsory winding-up.
[6] Truval is not a party to the original winding-up application brought by Enyuka and does not oppose it. It has no objection to a compulsory winding-up order being granted, and argues that if such order is granted, the deemed date of liquidation would still be 2 February 2022. It seeks to avoid the setting aside of the voluntary winding-up, which would disturb the current deemed date of commencement.
[7] Alternatively, to the extent that the court has the power upon the setting aside of the winding-up in terms of section 354 to do so on such terms and conditions as the court may deem fit, which includes a determination of the date of commencement of the liquidation, Truval’s counsel has urged the court during oral argument to retain 2 February 2022 as the date of commencement of the liquidation.
[8] Enyuka’s winding-up application is not opposed by United’s current liquidators, who was appointed pursuant to the voluntary liquidation, nor do they oppose the application for the setting aside of the voluntary liquidation.
Background to the current application – the main application for the winding-up of United
[9] On 25 June 2021 Enyuka presented a notice of motion to this court, seeking the winding up of United due to non-payment of outstanding rentals and other charges under six lease agreements. United entered into these agreements for premises in various retail centres but failed to make due payments since April 2020, with only sporadic nominal payments made between June and November 2020. Despite numerous discussions and attempts to agree on a repayment plan, United did not settle the outstanding amounts.
[10] As of January 1, 2021, United owed Enyuka R1,211,196.90. Additionally, United owed R1,180,958.43 to other property owners for similar lease agreements, bringing the total debt to R2,805,139.58. The applicant served notices in terms of section 345 of the CA (1973) on United on 8 February 2021, demanding payment within three weeks, but United failed to comply. This non-compliance has led to an application for winding up based on commercial insolvency and inability to pay its debt in the normal course.
[11] The applicant complied with statutory requirements, including filing a certificate of security, lodging the application with the Master of the High Court, and serving copies to required parties.
[12] This application was opposed by United and on 11 August 2021 United delivered an answering affidavit deposed to by Daniel Louis Steiner, a member of United, in response to Enyuka’s founding affidavit. Steiner asserted that Enyuka lacked locus standi to claim arrear rent from United due to cessions in securitatem debiti of rental income to mortgagees, Nedbank Ltd and Maitlantic 04 (RF) (Pty) Ltd, as part of mortgage bonds on the properties in question. Steiner argued that applicant has divested itself of the power to sue for rentals, and any unpaid rent has been ceded to the mortgagees.
[13] The applicant delivered a replying affidavit on 20 September 2021. In respect of United’s defence that Enyuka was not a creditor due to a cession of rental claims to its financiers, Enyuka replied by stating that prior to the launching of the application, claims were re-ceded to it by Nedbank, one of the mortgagees, and annexed documentary evidence of such re-cessions. The applicant also demonstrated that the relevant clause contained in the other mortgage bonds, in favour of Maitlantic 04 (RF) (Pty) Ltd, did not contain any cessions.
[14] On the papers before court, it cannot be said that United disputed Enyuka’s claim on bona fide and reasonable grounds sufficiently to find that a winding-up order should be refused in accordance with the well-known Badenhorst – principle.5 United clearly had no defence against Enyuka’s claims. To the contrary, Enyuka’s case that it was a creditor of United as set out above, was unassailable.
[15] Later in this judgment, I shall deal with an issue that was raised by Truval at a late stage of these proceedings, that Enyuka’s claim against United had become prescribed after the application was launched, and before the hearing of this matter, and that Enyuka was no longer a creditor with locus standi to bring the application for the setting aside of the voluntary winding-up.
[16] In the answering affidavit, Steiner also denied that United was unable to pay its debts in the normal course, but such denial was entirely predicated on the unsustainable contention that United did not owe the money to Enyuka. Having regard to the content of the answering affidavit and United’s approach, United was indubitably unable to pay its debts in the normal course of events and was liable to be wound up by way of a compulsory winding-up by the court.
[17] Under the circumstances, it could reasonably have been expected from United to have consented to a compulsory winding-up by the court. However, United unreasonably persisted with its opposition to Enyuka’s winding-up application. Such opposition was clearly a delaying tactic.
[18] On 30 November 2021 Enyuka delivered its heads of argument with a view on the hearing of the matter on the opposed motion roll, and when United failed to deliver its heads of argument in accordance with the applicable practice directive, Enyuka served a notice on it to comply on 26 January 2022.
The alleged surreptitious voluntary winding-up of United
[19] While the 10-day period for United to comply with the notice dated 26 January 2022 was still running, unbeknown to Enyuka, United registered a special resolution for its voluntary winding-up with the CIPC on 2 February 2022. It later transpired that the special resolution was allegedly adopted on 6 December 2021.
[20] Only on 2 March 2022 United's attorney, Mr Steven Weinberg from Moss Cohen & Partners, informed Enyuka’s attorney, Mr Steven Kokinis, via email that United had been placed under liquidation. Mr. Weinberg stated that he was not involved in the liquidation process, which was allegedly handled by Smalman Attorneys in Pretoria.
[21] After multiple email communications from Enyuka’s attorneys to Smalman Attorneys, the second respondent eventually provided Enyuka’s attorneys with several documents on 5 April 2022. These documents included the certificate of appointment of the liquidators, United's special resolution CM26 dated 6 December 2021, United's statement of affairs CM100, and the fifth respondent's certificate CM26LIQ.
The application for an order declaring the special resolution and its registration void, and for the setting aside of United’s voluntary winding up, and application for compulsory winding-up
[22] During August 2022 Enyuka launched the application, which is the subject matter of this judgment, requesting the following relief:
a. An order declaring the special resolution for the voluntary liquidation of the first respondent including the statement of affairs ("CRS(a)" and "CRS(b)" to the founding affidavit) and the registration thereof with the fifth respondent on 2 February 2022 to be void ab initio;
b. An order setting aside, in terms of section 354 of the Companies Act 61 of 1973 the voluntary liquidation of the first respondent pursuant to the registration of the special resolution ("CR5(a)" to the founding affidavit);
c. An order setting aside the appointment of the second and third respondents as the joint provisional liquidators of the first respondent;
d. An order placing the first respondent under winding-up in the hands of the Master in terms of prayers 1 (alternatively 2) and 3 of the notice of motion in the pending liquidation application under the above case number;
e. An order declaring that the winding-up ordered in 4 above commenced on 25 June 2021 in terms of section 348 of the Act;
f. An order directing the fourth respondent to appoint a provisional liquidator or liquidators for the first respondent;
g. An order directing the fourth and fifth respondents to adjust their records to reflect the consequences of the orders in 1 to 6 above;
h. That the costs of this application shall be costs in the liquidation.
[23] Before I set out and discuss the basis of this relief, it will be expedient to set out the legislative framework against which this application must be considered.
The legislative framework for the liquidation of insolvent close corporations
[24] At the outset it must be remarked that the legislative history regarding the liquidation of close corporations, cross-referencing between the Close Corporations Act 69 of 1984 (“CCA”) and the Companies Act 71 of 2008 (“the CA (2008)”), the cross referencing between the CA (2008) and the CA (1973), possible erroneous or inaccurate references in the CCA to sections in the same Act which have been effectively repealed or amended in a manner which makes the cross-reference non-sensical, created a spider-web of confusion.
[25] As a result of the quagmire of cross-references, with different aspects of the inquiry being involved in these cross-references, certain of the provisions will be repeatedly referred to hereunder. While this may result in somewhat tedious reading, it is unfortunately necessary for understanding the interplay among these enactments.
[26] Interpretation problems created by this must be resolved by way of statutory interpretation, in accordance with the oft-quoted principles of purposive interpretation set out in, inter alia Natal Joint Municipal Pension Fund v Endumeni Municipality.6 Interpretation is the process of attributing meaning to the words used in a document, be it legislation, some other statutory instrument, or contract, having regard to the context provided by reading the particular provision or provisions in the light of the document as a whole and the circumstances attendant upon its coming into existence. Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production. Where more than one meaning is possible each possibility must be weighed in the light of all these factors. The process is objective, not subjective. A sensible meaning is to be preferred to one that leads to insensible or unbusinesslike results or undermines the apparent purpose of the document.
[27] In the original version of the CCA (before its amendment by Act 26 of 1997), the compulsory liquidation of corporations by the court was regulated by section 66(1) which provided that “the provisions of the Companies Act which relate to the winding-up of a company, including the regulations made thereunder, (except sections 337, 338, 344, 345, 346 (2), 347 (3), 349, 364, 365 (2), 367 to 370, inclusive, 377, 387, 389, 390, 395 to 399, inclusive, 400 (1) (b), 401, 402, 417, 418, 419 (4), 421, 423 and 424), shall apply mutatis mutandis and in so far as they can be applied to the liquidation of a corporation in respect of any matter not specifically provided for in this Part or in any other provision of this Act”.
[28] Section 66(2)(a) stated that for purposes of section 66(1), a reference in a relevant provision of the Companies Act (at that time the CA (1973)), and in any provision of the Insolvency Act, 1933 made applicable by any such provision, inter alia, a reference to a company must be taken as a reference to a corporation. The subsection also contained a multitude of other provisions to ensure that the CA (1973) is applied mutatis mutandis to corporations.
[29] Because section 68 of the CCA regulated the grounds for liquidation of a corporation by the court (inter alia on the basis of inability to pay its debts), and section 69 determined when a corporation would be deemed to be unable to pay its debts for purposes of section 68, corresponding provisions of the CA (1973)7 were excluded from applying to corporations.
[30] Section 67 of the CCA, in its original form, regulated the voluntary winding-up of close corporations. It provided that a corporation can be wound up voluntarily if all its members so resolve at a meeting called for purpose considering the winding up and sign a written resolution that the corporation by voluntarily wound up by members or creditors, as the case may be. Section 67 also regulated the registration of the resolution. Due to the importance of this section, it needs to be quoted in full:
“Section 67 - Voluntary winding-up
(1) A corporation may be wound up voluntarily if all its members so resolve at a meeting of members called for the purpose of considering the winding-up of the corporation and sign a written resolution that the corporation be wound up voluntarily by members or creditors, as the case may be.
(2) A copy of the written resolution, in duplicate in the prescribed form, shall be lodged within 28 days after the date of the passing of the resolution, together with the prescribed fee, with the Registrar, who shall register such resolution if it complies with the provisions of subsection (1).
(3) If such copy of the written resolution is not so registered by the Registrar within 90 days from the date of the passing of the resolution, the resolution shall lapse and be void.
(4) A resolution in terms of this section shall not take effect until it has been registered by the Registrar.”
[31] Importantly, by virtue of section 66(1) the voluntary winding-up provisions of the CA (1973) was also made applicable to close corporations, subject to the important rider that they would apply in respect of any matter not specifically provided for in Part 9 of, or in any other provision of the CCA.
[32] Consequently, the two Acts had to be read together in this regard.
[33] Notably, section 67 did not require the adoption of a “special resolution” as a requirement for a voluntary winding up. The requirement was that the resolution must be adopted and signed by all the members of the corporation. The idea of a “special resolution” was not used in the CCA itself at all, and to the extent that reference was made to special resolutions in certain sections of the CA (1973), section 66(2)(b) stated that such special resolutions must be taken as a resolution by all the members as determined in section 67.
[34] Section 67 had to be read with section 48, which regulated meetings of members. It determined that a member of the corporation may convene a meeting of members by giving reasonable notice to all other members and any other person entitled to attend a meeting of the corporation, for purposes of considering the matters mentioned in the notice. For a resolution to voluntarily wind a corporation up to be taken, the stated purpose of the meeting must have been to consider the voluntary winding-up of the corporation.
[35] Section 66(1) of the CCA was amended by Act 26 of 1997 to read as follows:
“The provisions of the Companies Act which relate to the winding-up of a company, including the regulations made thereunder, (except sections 311, 312, 313, 337, 338, 344, 345, 346 (2), 347 (3), 349, 364, 365 (2), 367 to 370, inclusive, 377, 387, 389, 390, 395 to 399, inclusive, 400 (1) (b), 401, 402, 417, 418, 419 (4), 421, 423 and 424), shall apply mutatis mutandis and in so far as they can be applied to the liquidation of a corporation in respect of any matter not specifically provided for in this Part or in any other provision of this Act.”
[36] This amendment additionally excluded provisions in the CA (1973) relating to a compromise with creditors after liquidation, as the CCA had its own composition procedure. This not important in this matter.
[37] Up to this point in time, despite the somewhat complicated cross-referencing between the two acts, the legal position was relatively clear. Of importance in the present matter is that in terms of section 67 resolutions for voluntary liquidation had to be a unanimous decision by all members, signed by all members, and had to be registered in accordance with section 67.
[38] Consequently, where provisions of the CA (1973), like section 351(1), required a special resolution to be registered in terms of section 200 of the CA (1973) before it would have effect, as far as close corporations are concerned, section 200 did not apply, because this issue was already regulated by section 67 of the CCA, read with section 48. Nor would section 199 of the CA (1973), to which reference is made in section 200, have applied to close corporations, because the procedure for the adoption of the relevant resolution was also already regulated by the CCA.
The amendment of the Close Corporations Act by the Companies Act, 2008
[39] The CA (2008) amended section 66(1) of the CCA to provide that the laws mentioned or contemplated in item 9 of Schedule 5 of the CA (2008), read with the changes required by the context, apply to the liquidation of a corporation in respect of any matter not specifically provided for in this Part (i.e. Part 9 of the CCA) or in any other provision of this Act (i.e. the CCA).
[40] The CA (2008) introduced section 66(1A) to the CCA, which provides that the provisions of Chapter 6 of the Companies Act (a reference to the business rescue provisions in the 2008 Act), read with the changes required by the context, apply to a corporation. This is also not important in this matter.
[41] The CA (2008) did not amend section 66(2)(a) of the CCA. The definition of the “Companies Act” in the CCA was, however, amended to mean the CA (2008). An uncritical reading section 66(2), therefore, results in “Companies Act” referring to the CA (2008) in accordance with the definition of “Companies Act”. However, to the extent that subsection (2) supplements subsection (1), it is patently clear that was intended was to retain a reference to the CA (1973), and not the CA (2008).
[42] It must be noted that the CA (2008) repealed section 68 (the section setting out the grounds for a compulsory liquidation by the court). Read with section 66(1) of the CCA, and Item 9 of Schedule 5 to the CA (2008), this meant that from the date of the promulgation of the CA (2008), compulsory liquidations of insolvent close corporations must be dealt with in accordance with Part 14 of the CA (1973).
[43] Section 69, which determined when a corporation would be deemed to be unable to pay its debts for purposes of section 68(c), was retained. This retention was not necessary, as the question whether the corporation is unable to pay its debts would in terms of section 66(1) be determined by Chapter 14 of the CA (1973), in particular section 345, which must be read with 344(f), which provides that a company who is unable to pay its debts “as described in section 345” can be liquidated by the court. Nevertheless, it has been held that both section 69 of the CCA and section 345 of the CA (1973) must be taken as deeming provisions of inability of the corporation to pay its debts.8 I agree with this view on the interplay between section 69 of the CCA and Sections 344(f) and 345 of the CA (1973).
[44] Consequently, the compulsory liquidation of insolvent corporations by the court is now regulated by Chapter 14 of the CA (1973), supplemented by section 69 of the CCA.
[45] In this context, “insolvency” encompasses at least commercial insolvency, i.e. the inability by a company or close corporation to pay its debts in the normal course of business.9
The legislative framework of voluntary liquidation of close corporations
[46] As indicated above, section 67 of the CCA was the cornerstone of voluntary liquidations of close corporations, supplemented by the detailed provisions of the CA (1973).
[47] After an amendment by the CA (2008), under a heading “Dissolution of corporations”, Section 67(1) of the CCA now provides that Part G of Chapter 2 of the Companies Act, read with the changes required by the context, applies to a solvent corporation. This part of the CA (2008) regulates the liquidation of solvent companies (sections 79, 80 and 81) and also regulates dissolution of companies upon finalisation of a winding-up and upon removal from the register. (sections 82 and 83). Section 67(1) of the CCA must be considered with section 26 of the CCA (also the result of a CA (2008) amendment) which provides that Sections 81 (1) (f), 81 (3), 82 (3) to (4), and 83 of the CA (2008), each read with the changes required by the context, apply with respect to the deregistration of a corporation. The import of the overlap in the current provisions of sections 26 and 67 of the CCA (in essence a duplication) in respect of the deregistration of corporations must be considered. It would appear to me that this overlap is somewhat nonsensical. It could never have been the intention to make Part G of Chapter 2 applicable to the removal from the register (i.e. deregistration) and consequent dissolution of close corporations, only when the corporation was solvent, as is the requirement set by section 67(1). Neither the CCA, nor the CA (2008), contain any requirement regarding the solvency or insolvency of a company or corporation in the case of a deregistration. Nor do these Acts have a mechanism whereby it can be determined by the CIPC whether a corporation is solvent or insolvent before removing it from the register. To apply Part G of Section 2 of the CA (2008) to the deregistration of solvent corporations only, makes no sense, and could never have been intended.
[48] I am fortified in this view by the fact that section 67(2) of the CCA provides that Part 9 of the CCA must be administered in accordance with the laws mentioned or contemplated in item 9 of Schedule 5 of the CA (2008). This item is to the effect that the liquidation of solvent companies (or corporations) must be dealt with in terms of the CA (2008), and that other liquidations (i.e. of insolvent companies (or corporations) is regulated by Chapter 14 of the CA (1973). Item 9 does not regulate the legislation applicable to the deregistration and consequent dissolution of companies and corporations at all.
[49] Consequently, on a proper interpretation of the current section 67(1) of the CCA, it must be confined in its application only to the liquidation of solvent corporations (making Part G of Section 2 of the CA (2008) applicable).
[50] At the same time, the result of this it that the voluntary liquidation of insolvent close corporations is regulated by Chapter 14 of the CA (1973).
[51] However, the complexity of the CA (2008) amendments arises in connection with the requirements for a special resolution and the registration thereof after the amendments.
The voluntary liquidation proceedings in the Companies Act, 1973 and the requirement of a special resolution in relation to companies and close corporations
[52] Section 349 of the CA (1973) provides that a company, not being an external company, may be wound up voluntarily if the company has by special resolution resolved that it be so wound up.
[53] Section 351(1) of the CA (1973) provides that the voluntary winding-up of a company shall be a creditors' voluntary winding-up if the resolution contemplated in section 349 so states, but such a resolution shall be of no force and effect unless it has been registered in terms of section 200.
[54] Section 66(2)(b) of the CCA provides that a reference to a special resolution referred to in sections 340(2), 350(1), 351(1), 352, 356(2), 357(3) and (4), 359(1), 362 (1) and 363(1) of the Companies Act10, shall be construed as a reference to a written resolution for the voluntary winding-up of a corporation in terms of section 67 of the CCA. This section has not been amended by the CA (2008).
[55] As discussed above, section 67 of the CCA, before its amendment (in reality, its effective repeal) by the CA (2008) generally made provision for the voluntary liquidation of close corporations by way of a resolution adopted and signed by all its members, which had to be registered by the erstwhile Registrar of Companies within 28 days after its adoption, and if not registered within 90 days it would lapse. This section did not use the concept “special resolution”.
[56] Section 74(2) of the CCA also provides that the Master shall appoint a liquidator as soon as is practicable after a provisional winding-up order has been made, or a copy of a resolution for a voluntary winding-up has been registered in terms of section 67(2).
[57] In its current form after having been amended by the CA (2008), section 67(1) of the CCA (interpreted as set out above) deals purely with the voluntary liquidation of solvent corporations, while section 67(2) contains the reference to Item 9 of Schedule 5 to the CA (2008) and making the legislation referred to therein applicable to Section 9 of the CCA. Section 67 no longer contains any requirement that the resolution for a voluntary liquidation must comply with.
[58] This obviously creates uncertainty as to what is required for a “special resolution” for the winding up of an insolvent close corporation. Prima facie the amendment rendered the reference in section 66(2)(b) to section 67 nugatory. However, in my view this is not the case.
[59] I shall first deal with the requirements for special resolutions for the voluntary winding-up of companies.
[60] Section 349 of the CA (1973) provides that a company, not being an external company, may be wound up voluntarily if the company has by special resolution resolved that it be so wound up.
[61] Section 351 of the CA (1973) provides that a special resolution for a creditors’ voluntary winding up shall be of no force and effect unless the resolution has been registered in terms of section 200. This provision has interpretation problems of its own, as section 200 has been repealed by the CA (2008) without being replaced by any equivalent provision in the case of insolvent companies or corporations.
[62] Having regard to the language used in Item 9 of Schedule 5, it provides that Chapter 14 of that Act (i.e. the CA (1973) continues to apply with respect to the winding-up and liquidation of companies under the CA (2008), as if the CA (1973) had not been repealed. From the language used, the following is evident:
a. First, Chapter 14 of the CA (1973) continues to apply to liquidations;
b. Second, it applies as if the CA (1973) has not been repealed.
[63] The second part does not state that Chapter 14 would apply as if Chapter 14 have not been repealed, it expressly states that it would apply as if the CA (1973) generally has not been repealed. In my mind the meaning that must be ascribed to this is that, to the extent that Chapter 14 lives on for the time being, its existence is supplemented by the CA (1973) in its entirety to the extent necessary for the proper implementation of Chapter 14. However, exactly what portions of the remainder of the Companies Act (1973) must be regarded as in operation in support of Chapter 14, must be tested against the general principles of purposive interpretation.
[64] This interpretation was adopted obiter by Van der Linde J in this court in Carstens v Millennium Clutch Manufacturing (Pty) Ltd11 when he held that “the saving of chapter 14 of the old Act must be understood to include all other sections outside of chapter 14 that are necessarily incorporated into the sections within chapter 14. The legislature intended, it is suggested, that the process of the winding-up of companies would continue unchanged was it was under the previous statutory regime”.12 In Wild & Marr (Pty) Ltd v Intratek Properties (Pty) Ltd13 Sutherland J (as he then was) held in relation to the dual jurisdiction principle in company liquidations that provisions of the CA (1973) outside Chapter 14 also apply to the liquidation of a company, e.g. the definition of “court” in section 1, and section 12 in respect of jurisdiction (which allows for a company’s principal place of business and registered address to be in different locations). The learned judge followed the judgment of Gable J in Van der Merwe v Duraline (Pty) Ltd14 and held as follows:
“ . . . that liquidations of insolvent companies remain, for the time being, the preserve of chapter 14 of the 1973 Act. That procedural regime draws on other provisions of the 1973 Act, including s 12. To conclude otherwise would be to produce an intolerable incoherence if sections of the 1973 Act were to be ignored and reliance placed on provisions of the 2008 Act, including s 23. I agree with this reasoning. Section 224(3) of the 2008 Act, read with item 9 of sch 5 to the 2008 Act, preserves ch 14 of the 1973 Act in operation. In that chapter the 'court' referred to must be the 'court' as defined in s 1 of the 1973 Act, which in turn is the court referred to in s 12 of the 1973 Act.”15
[65] Consequently, the provisions of section 200 of the CA (1973) continue to apply to the required registration of company special resolutions in relation to voluntary liquidations. There is no corresponding provision in the CA (2008), and without it, the voluntary winding-up provision is the CA (1973) will be rendered nugatory. Consequently, I am of the view that section 200 continues to apply to companies.
[66] For the sake of completeness, I quote the provisions of section 200:
“(1) Within one month from the passing of a special resolution a copy of such resolution together with either a copy of the notice convening the meeting concerned or a copy of the consent contemplated in section 199 (3A), as the case may be, shall be lodged with the Registrar, who shall, subject to the provisions of subsection (2), and upon payment of the prescribed fee, register such resolution.
(2) The Registrar may refuse to register any special resolution so lodged with him, except upon an order of the Court, if such resolution appears to him to be contrary to the provisions of this Act or of the memorandum or articles of the company concerned.
(3) A copy of every special resolution for the time being in force shall be embodied in or annexed to every copy of the articles issued after the registration of the resolution.
(4) A copy of every special resolution shall be transmitted by the company concerned to any member thereof at his request, and on payment of an amount of twenty-five cents or such lesser amount as the company may determine.
(5) Any company which fails to comply with any requirement of subsection (3) or (4) and every director or officer thereof who knowingly permits or is a party to the failure, shall be guilty of an offence.
(6) If a company makes default in lodging with the Registrar a copy of any special resolution, and the notice or the consent, as required by subsection (1), the company, and every director or officer who knowingly permits or is a party to the default, shall be guilty of an offence.”
[67] Section 200 of the CA (1973) contributes its own interpretations problems, in that it refers to section 199 of the CA (1973), which contained detailed provisions which companies had to comply in connection with special resolutions.
[68] Section 199(1) of the CA (1973) provided as follows:
“A resolution by a company shall be a special resolution if at a general meeting of which not less than twenty-one clear days' notice has been given specifying the intention to propose the resolution as a special resolution, the terms and effect of the resolution and the reasons for it and at which-
(a) members holding in the aggregate not less than one-fourth of the total votes of all the members entitled to vote thereat, are present in person or by proxy; or
(b) in the case of a company limited by guarantee, not less than one-fourth of the members entitled to vote thereat are present in person or by proxy,
the resolution has been passed, on a show of hands, by not less than three-fourths of the number of members of the company entitled to vote on a show of hands at the meeting who are present in person or by proxy or, where a poll has been demanded, by not less than three-fourths of the total votes to which the members present in person or by proxy are entitled.”
[69] Section 199(3) provides as follows:
“With the consent of a majority in number of the members of a company having the right to attend and vote at such meeting and holding in the aggregate not less than ninety-five per cent of the total votes of all such members, a resolution may be proposed and passed as a special resolution at a meeting of which less than twenty-one clear days' notice has been given. A copy of such consent, on the prescribed form, shall be lodged with the Registrar together with the copy of the special resolution.”
[70] Section 199(3A) provides as follows:
“Notwithstanding the provisions of subsection (1), a resolution may, with the written consent, on the prescribed form, of all the members of the company, be proposed and passed as a special resolution at a meeting of which notice as contemplated in subsection (1) has not been given. A copy of such consent, on the prescribed form, shall be lodged with the Registrar together with a copy of the special resolution.”
[71] Section 66(1), through the reference to Item 9 of Schedule 5 to the CA (2008), made Chapter 14 of the CA (1973) applicable to corporations, in respect of any matter not specifically provided for in that part (Part 9) or in any other provision of the Act. The current section 67(2) similarly provides that Chapter 9 is regulated by the legislation referred to in Item 9 of Schedule 5.
[72] In C Pro Construction (Pty) Ltd v Caliber Devco CC16 JJ Strydom AJ (as he then was) held that sections 199 and 200 should have been complied with by the close corporation in adopting a resolution for voluntary winding-up. This approach is generally consistent with the approach in Van der Merwe v Duraline (Pty) Ltd, Wild & Marr (Pty) Ltd v Intratek Properties (Pty) Ltd and Carstens v Millennium Clutch Manufacturing (Pty) Ltd.
[73] Consequently, to the extent that section 66(2)(b) provides that in relation to corporations the special resolutions referred to in the relevant provisions of the CA (1973) must be taken as a reference to the resolution referred to in section 67, this must be interpreted as a reference to special resolutions in the CA (1973), including sections 200 and 199.
[74] Regrettably, this leads to the situation that in relation to both companies and close corporations there are currently two set of internal management rules applicable. In relation to companies, the rules relating to the convening of meetings, and the procedure at meetings, are generally regulated by the CA (2008), which brought substantial changes to company internal management rules. However, in relation to special resolutions for the voluntary winding-up of companies, the CA (1973) applies. The same situation pertains to close corporations. Section 48 of the CCA, which generally regulates meetings of members of a corporation, merely requires reasonable notice of a meeting. However, special resolutions for the voluntary winding-up of insolvent close corporations are regulated by the internal management rules contained in the CA (1973). This also means that in relation to the voluntary winding-up of solvent companies and close corporations, different internal management rules apply compared to the position in relation to insolvent companies and corporations. These conflicts between internal management rules are highly undesirable.
[75] For this reason, I was tempted to embark upon an elaborate process of statutory interpretation involving both the usual principles of purposive interpretation, and other interpretation tools. This could potentially have resulted in section 67 in its pre-amendment form being viewed as having survived the amendment of the CCA by the CA (2008) in relation to the voluntary winding-up of insolvent corporations and could also have resulted in the internal management rules relating to corporations contained in the CCA regulating the voluntary winding-up of insolvent corporations. However, the extent of the deviation from the language in the various enactments would have been so extensive, that such an exercise would have been inappropriate. Moreover, this would also have been contrary to the decisions of this Division, referred to above, which evidently adopted a straightforward and pragmatic approach to this issue, to which I am bound, and with which, after careful consideration, I agree with entirely.
[76] Consequently, the dichotomy in internal management rules created by the rather complicated legislative amendments ought to be left to the legislature to resolve.
Other requirements for the special resolution in terms of the Companies Act, 1973 – section 363
[77] Section 363(1) of the CA (1973) provides that where it is intended to pass a resolution for a creditors' voluntary winding-up of a company, the directors of that company shall make out or cause to be made out, in the prescribed form, a statement as to the affairs of the company and lay it before the meeting convened for the purpose of passing such a resolution.
[78] In the case of a close corporation the reference to the directors must be taken as a reference to all the members of the corporation.
[79] Section 363(4) provides that the statement as to the affairs of a company referred to in subsection (1) or (2):
a. shall contain such matter and be in such form as prescribed including particulars of the company's assets, debts, liabilities (including contingent and prospective liabilities), any pending legal proceedings by or against it, the names, addresses and nature of the businesses of its creditors, the security held by each of them, the dates when each of the securities was given and, in the case of such a statement under subsection (2), such further information as the Master may require; and
b. shall be verified by affidavit by each of the persons referred to in subsection (1) or (2) and such verifying affidavit shall be annexed to the said statement.
[80] The provisions of section 363(4) are clearly peremptory.
[81] Subsection 8 of section 363 provides that any person who fails to comply with any requirement of subsection (1), (2) or (4) shall be guilty of an offence.
[82] The form prescribed for a statement of affairs in terms of the CA (1973) is the CM100 Statement of Affairs Form.
[83] In C Pro Construction (Pty) Ltd v Caliber Devco CC17 it was held that non-compliance with the provisions of section 363 renders the voluntary liquidation, and the consequent appointment of a liquidator void. The judgment in Botha NO v Van den Heever NO18 appears to be of same effect.
[84] The general principle that something done in contravention of a statute is void and of no effect, no longer applies in all cases. It depends on the proper construction of the particular legislation.19
[85] The language used in section 363(1) and (4) is peremptory; a statement of affairs shall be placed before the meeting and shall comply with certain requirements.
[86] The purpose of the statement of affairs is clearly to ensure that the directors of a company, or the members of a corporation, place full and accurate information before the meeting convened to consider the voluntary winding-up, to enable the members of the company or corporation to make an informed decision about the winding-up of the company or corporation during the meeting. Accordingly, the statement of affairs fundamentally informs the special resolution, and is a necessary prerequisite for the resolution to be adopted.
[87] It is important that a special resolution for the winding-up of a company or corporation does not only affect the company, the corporation and its members. It affects the rights of third parties as well. The statement of affairs enables the members to consider the effect of the winding-up on the rights of third parties as well. Moreover, this far-reaching decision is made in the absence of third parties, whose rights are affected. To the extent that that the law allows this process, which at first glance seems to be contrary to notions of justice and fairness, if the purpose of the provision is taken into account, for a special resolution for a voluntary winding-up of an insolvent company or close corporation to be validly adopted, there must be compliance with the provisions of sections, 199, 200 and 363. Furthermore, similar to where applications are brought ex parte, the process requires the members of a company or close corporation to act with the utmost of good faith.
[88] The fact that non-compliance with section 363 is visited with a criminal sanction, is no reason to conclude in the present matter that non-compliance with section 363 does not result in the invalidity of the special resolution. It could never have been the intention that the mere fact that a delinquent director or member could be criminally punished, that third parties are compelled to suffer the consequences of non-compliance.
[89] In the premises, I also hold that non-compliance with the provisions of section 363 results in the special resolution for winding-up being void.
[90] It must be emphasised that this ruling does not deal with the situation where there are mere inaccuracies in a statement of affairs, under circumstances where it can be said that there was still compliance with section 363 (given that the concept of “substantial compliance” is no longer in favour). Each case must be decided on its own facts in this regard.
The staying or setting aside of proceedings in relation to a winding-up
[91] Section 354 of the CA (1973) provides that:
a. the Court may at any time after the commencement of a winding-up, on the application of any liquidator, creditor or member, and on proof to the satisfaction of the Court that all proceedings in relation to the winding-up ought to be stayed or set aside, make an order staying or setting aside the proceedings or for the continuance of any voluntary winding-up on such terms and conditions as the Court may deem fit; and
b. the Court may, as to all matters relating to a winding-up, have regard to the wishes of the creditors or members as proved to it by any sufficient evidence.
[92] In Ward and Another v Smit and Others: In re Gurr v Zambia Airways Corporation Ltd20 it was held that the language of section 354 is wide enough to afford the Court a discretion to set aside a winding-up order both on the basis that it ought not to have been granted at all and on the basis that it falls to be set aside by reason of subsequent events. In the case of the former, the onus on an applicant is such that generally speaking the order will be set aside only in exceptional circumstances. The court also held that there is nothing in the section to suggest that the Court's discretionary power to set aside a winding-up order is confined to the common-law grounds for rescission. The court agreed with Eloff J in the Herbst case21 that no less would be expected of an applicant under the section than of an applicant who seeks to have a judgment set aside at common law. The object of the section is not to provide for a rehearing of the winding-up proceedings or for the Court to sit in appeal upon the merits of the judgment in respect of those proceedings. To construe the section otherwise would be to render virtually redundant the facilities available to interested parties to oppose winding-up proceedings and to appeal against the granting of a final order. It would also 'make a mockery of the principle of ut sit finis litium'.
[93] This discussion by the SCA of section 354 was entirely directed at the situation where the winding-up order was granted by the court. The court did not deal with the situation where the winding-up was a voluntary winding-up. In the case of a voluntary winding-up, interested parties have no opportunity to oppose the commencement of the winding-up. It can be done clandestinely, without any notice to interested parties, and interested parties will only learn that the winding-up commenced after the special resolution has been registered. If this procedure is compared to a compulsory winding-up by the court, it can be equated to a final winding-up which is granted on an ex parte basis, without a rule nisi. If this were a process in court, it would have been a shockingly unfair and unjust process, evidently contrary to section 34 of the Constitution22, which guarantees the resolution of civil disputes through a fair process.
[94] Under circumstances where there is contestation regarding the compulsory winding-up of a company or corporation, an intervening voluntary winding-up in essence amounts to self-help, which should in principle not be countenanced.
[95] The winding-up of a company or corporation itself materially impacts upon the rights of a creditor. The timing of the commencement of the winding-up, furthermore, has a further potential impact on the rights of a creditor. It is clear that the current process of voluntary winding-up enables a company or corporation to surreptitiously place the company or corporation in liquidation, without creditors having the opportunity to give any input, and enables the company or corporation to manipulate the date of commencement of the liquidation.
[96] The question arises whether the same approach can be applied to voluntary liquidations as in the case of compulsory liquidations. In my mind logic dictates that in the case of voluntary winding-up, the approach should be akin to the process where an order was granted ex parte, and an interested party has the right to ask for a reconsideration of the order or has the right to oppose the confirmation of a rule nisi on a return date. In such cases, the court would either reconsider the matter afresh on the original papers or decide the matter afresh on all the papers that have been filed. A party asking for a reconsideration or opposing the confirmation of a rule nisi is not burdened with the onus of showing exceptional circumstances. The process entails a complete re-hearing of the matter. Of utmost importance is also the requirement that the resolution must be adopted with the utmost good faith and must comply with relevant statutory requirements.
[97] Accordingly, in my view in the case of the setting aside of a voluntary winding-up, the primary question is whether the requirements for a voluntary winding-up had been complied with, and whether the winding-up should have commenced at all. If the requirements have not been met, there would be no need to show any exceptional circumstances to set the winding-up aside. In reality, in such a case, although the result may be that the winding-up is set aside, the legal act underpinning the winding-up, being the special resolution, is found to be wanting, is declared void ab initio, and is set aside. In this regard, I am of the view that this is not a discretionary remedy; the question is, objectively, whether there was compliance with the requirements or not.
[98] Should the court find that the requirements were met, and that the special resolution was validly registered, different considerations would apply, which would bring the matter in line with the approach towards the setting aside of compulsory liquidations. Section 354 of the CA (1973) would afford the court a discretion to suspend or set the winding-up aside. Where the formal requirements have been met, there may still be circumstances which could justify the setting aside of the winding-up. Such circumstances may relate to the circumstances leading up to the adoption of the special resolution, or to circumstances that arose after the commencement of the winding-up. In such a case the court has a discretion, but a limited one. The test laid down for the setting aside a winding-up under s 354, on the basis of subsequent events, is whether the applicant has proved facts that show that it is unnecessary or undesirable for the winding-up to continue. This does not involve a choice between permissible alternatives. The test is either satisfied, or it is not.23 In my mind the same consideration will apply to circumstances that existed during the period prior to the commencement of the winding-up.
[99] In Ex parte Strip Mining (Pty) Ltd: In re Natal Coal Exploration Co Ltd (In Liquidation) (Kangra Group (Pty) Ltd and Another Intervening)24 it was held by the Supreme Court of Appeal that there is no distinction between the setting aside of a compulsory and voluntary winding-up as far as the onus resting on the applicant is concerned. In both instances the applicant has to prove its locus standi and the facts in support of the application. The headnote to the judgment suggests that the court held that in general there is no difference in the relevant considerations between the two situations. However, the judgment is confined to the issue of the onus resting on the applicant to prove its locus standi and other facts.
The grounds for the setting aside of the voluntary liquidation in the present matter
[100] This first issue raised by the applicant was regarding the validity of the alleged special resolution adopted on 6 December 2021. The first respondent had two members, Daniel Louis Steiner (holding 90% membership) and Craig Marc Burgin (holding 10%). The relevant special resolution recorded that notice of the meeting was given to the members on 6 December 2021, and that the notice was attached to the resolution. However, no such notice was attached. As the resolution was signed by Steiner only, and no notice was attached, it was submitted that no notice was given to Burgin. By necessary implication, the applicant’s contention is that one of the members was not given notice nor did he participate in the meeting.
[101] In the answering affidavit deposed by Burgin, Truval contended that Enyuka’s contention that no notice was given of the meeting to Burgin was false and stated that a meeting was held between them. However, without explanation, no documentary evidence of such notice, which would have been the best evidence, was presented to the court.
[102] Having regard to the content of the purported special resolution25 it does not record who was present when this resolution was taken. It merely purports to have been signed by Steiner on 6 December 2021, and records that it had been resolved that the corporation be placed in liquidation in terms of section 349 and 351 of the Companies Act, by creditors.
[103] Section 200(1) of the CA (1973) requires not only that the special resolution be registered, but that the resolution must be accompanied by the notice of the meeting, or the consent referred to in section 199(3A).
[104] Truval’s answering affidavit fails entirely to deal with the non-compliance with the provisions of section 199 and 200, which appear ex facie the document. There is no evidence by Truval that the required notice was indeed attached to the special resolution. The allegation that notice was given is irrelevant in this regard. Furthermore, it appears ex facie the document that 21 days written notice was not given as required by section 199. It records that notice was given on 6 December 2021, the same day the resolution was allegedly adopted.
[105] Section 199(3A) provides that notwithstanding the provisions of subsection (1), a resolution may, with the written consent, on the prescribed form, of all the members of the company, be proposed and passed as a special resolution at a meeting of which notice as contemplated in subsection (1) has not been given. A copy of such consent, on the prescribed form, shall be lodged with the Registrar together with a copy of the special resolution. No evidence was presented by Truval that in the absence of 21 days’ notice as required by section 199(1), the provisions of section 199(3A) was complied with.
[106] When I requested the parties to submit additional written argument on the question whether section 200 applies in casu, counsel for Truval submitted that section 200 was not debated before the court, and that the court was precluded from deciding the matter on the basis of the provisions of section 200. This was in the face of a further non-compliance, i.e.., United’s failure to cause the resolution to be registered within one month, as required. I am willing to assume in Truval’s failure that, in the light of section 202 of the CA (1973), the late registration of the special resolution does not invalidate it, provided it is registered within 6 months. I will also assume that the administrative processes for a late registration were complied with, and the relevant late registration fee paid, despite that fact that there is no evidence to that effect. As far as the remainder of the non-compliance with section 200 is concerned, apart from the fact that the non-compliance appears ex facie the document the facts surrounding such non-compliance have been fully ventilated on the papers. The problem which Truval has is that it failed to present evidence to demonstrate compliance in the face of evidence demonstrating non-compliance. As Truval had a full opportunity to traverse the facts, and failed to do so, there is no bona fide dispute of fact. Truval’s counsel attempted to rely on the Plascon-Evans rule in this regard. This submission is rejected, as the rule evidently does not find application on the facts of this matter.
[107] In the premises, I find that there was the following clear non-compliance:
a. Non-compliance with section 199(1), read with section 200(1) with regards to the required 21 days’ notice;
b. Non-compliance with section 199(3A), read with section 200(1) with regards to the written consent where 21 days’ notice was not given;
c. Non-compliance with section 200(1), which requires the 21 days’ notice or the consent in terms of section 199(3A) to be attached to the special resolution.
Enyuka’s attack based on section 363
[108] Enyuka further attacks the special resolution on the basis of various alleged defects in the statement of affairs that was signed by Steiner when the purported special resolution was adopted. These were the following:
a. The statement of affairs failed to disclose the existence of the pending liquidation application as required in terms of section 363(4)(a);
b. The statement of affairs was not verified by affidavits as required in terms of section 363(4)(b) of the Act;
c. The statement of affairs failed to disclose the details of the respondent's various creditors as required in terms of section 363(4)(a) of the Act. In particular, neither Enyuka, nor any of the respondent's other landlords, was mentioned therein. Next to SARS's name appears only a question mark;
d. The statement of affairs is self-contradictory in that it reflects on the second page thereof, the value of the respondent's unsecured creditors as R8 445 479.66 whereas the list "A" attached to it reflects unsecured creditors to the value of R52 401 479.66 in total, a discrepancy of R43 956 000.00.
[109] I have held above that the requirement of section 363(4)(b) is peremptory, and that all the members of a close corporation must depose to an affidavit verifying the statement of affairs in support of the voluntary winding-up. Enyuka specifically relied on this non-compliance.
[110] On the undisputed facts of this matter no affidavit was deposed to by any of its members verifying the statement of affairs, not even by Steiner who purportedly signed the resolution.
[111] Furthermore, it is patently clear that Enyuka’s other criticism of the statement of affairs, as set out above, are entirely justified on the facts.
[112] Truval’s counsel attempted to persuade me that the defects in the special resolution and statement of affairs amount to “imperfections” which do not invalidate the special resolution. The attempt to describe the aforesaid fundamental defects as “imperfections” falls to be rejected out of hand.
[113] In the premises I hold that the special resolution and statement of affairs are wholly deficient, fatally defective and void ab initio.
[114] Regrettably, despite the fact that it was patently clear that the special resolution and the statement of affairs were fatally defective, the CIPC, in flagrant disregard of its duty to act in accordance with the relevant legislation, nevertheless registered the special resolution. This should never have happened, and the voluntary winding-up of United should never have commenced on the basis of these fatally defective steps.
[115] On this basis alone, the order for the setting aside of the special resolution should be granted and, resultantly, the winding-up should be set aside in its entirety.
Further grounds for the setting aside of the winding-up
[116] Enyuka in essence contends, furthermore, that the surreptitious adoption and registration of the special resolution, was part of a stratagem on the part of both United and Truval to manipulate the date of commencement of the winding-up of United, which may have a material influence on proceedings in terms of the Insolvency Act for the setting aside of dispositions without value, voidable or undue preferences or collusive dealings. It may also affect dispositions of United’s property after the date Enyuka’s application was presented to the court, which if the order sought by Enyuka is granted would be the deemed date of United’s winding-up, and which would be void in terms of section 341 of the CA (1973). Furthermore, the process for initiating inquiries into the affairs of a company or corporation unable to pay its debts, is more cumbersome where the winding-up is a voluntary winding-up.26
[117] Truval’s counsel argued before me that the setting aside of the voluntary winding-up would deprive Truval of some of these advantages, and should, for that reason, not be ordered. There is, of course, no merit in this argument; it is a petitio principii which amounts to an argument that a perpetrator of fraud should not be stripped of his ill-begotten gains because it would prejudice him. This submission is rejected.
[118] Truval’s answering affidavit to a large degree confirms Enyuka’s contentions. Truval informed the court that it was United’s supplier of clothing and other merchandise United was selling to the public, and that on 31 March 20021 United was allegedly indebted to it in the amount of approximately R56 million. On 15 March 2021 United executed a general notarial bond in favour of Truval as security for the aforesaid indebtedness, which bond was registered by the Registrar of Deeds on 24 March 2021.
[119] It must be emphasised again at this juncture that Steiner and Burgin were the members of both United and Truval and were in control of these corporations. Consequently, for Truval to have perfected the general notarial bond, all that was needed was that United should have voluntarily handed over its movable assets to Truval to perfect the pledge. However, Truval proceeded to bring an urgent application against United for an order for permission to perfect the pledge and obtained an order in this court on 28 April 2021. Truval states that it perfected the bond within a week after the order was granted and took possession of United’s business and movable assets.
[120] The question can legitimately be asked why it was necessary for Truval to perfect the bond through a court order, rather than by consent, where Steiner and Bergin were in control of both entities. The answer to this question is fairly evident; in terms of section 1 of the Insolvency Act, a disposition of property of an insolvent in compliance with a court order is excluded from the definition of “disposition”, with the result that in principle such a disposition cannot be impeached in terms of the Act. Consequently, this exclusion provides a handy mechanism for unscrupulous operators to make collusive dispositions which would otherwise be impeachable in terms of the Insolvency Act, under the guise of a court order which was obtained by consent or obtained collusively on an unopposed basis. In the process the court, and its processes, can be abused to perpetrate a fraud on some of the insolvent’s creditors. In Dabelstein and Others v Lane and Fey NNO27 the Supreme Court of Appeal indeed held that there are circumstances under which a disposition may be set aside despite the fact that the disposition was in compliance with a court order. The court refrained from laying down the precise requirements but assumed that fraud or collusion or perhaps other kinds of reprehensible conduct on the creditor's part in procuring an order will suffice.28
[121] Under circumstances where Steiner and Bergen were in control of both entities and the notarial bond could have been perfected by consent, in my mind there is strong evidence that Truval’s urgent application and the order it obtained was an abuse of the process of court and simply a stratagem to perpetrate a fraud on United’s other creditors, in the sense of collusively and intentionally preferring Truval over the other creditors, or acting to the detriment of the other creditors.
[122] There is evidence that during March 2021 United also made substantial payments to Truval. Truval denied that such payments were made and suggested that the relevant entries in United’s statement of account were credit notes in respect of stock that were returned, and not payments. While the statement of account indeed reflects credit notes during the relevant period, the statement clearly also reflects substantial payments by United to Truval. Consequently, Truval’s denial of these payments is false and is rejected out of hand.
[123] In the premises, during the period of six months prior to the launching of Enyuka’s application for the liquidation of United, and at a time when Enyuka was clearly and hopelessly commercially insolvent, these aforesaid events occurred that are strong evidence of collusive dealings between United and Truval, to the detriment of other creditors.
[124] Against this background, Enyuka launched the application for winding-up of United during June 2021 on this basis of its inability to pay its debts. As already indicated above, United opposed this application on an unsustainable basis, and falsely denied its commercial insolvency. Instead of consenting to an order, or at least not opposing the application, it perpetrated a delaying tactic by unjustifiably opposing the application. This in itself was reprehensible and an abuse of the process of court.
[125] Then United, while it was obliged to deliver heads of argument in the liquidation application opposed by it failed to do so and instead surreptitiously purported to adopt a special resolution on 6 December 2021 for its winding-up by creditors. In the process United grossly failed to comply with the necessary requirements of sections 199, 200 and 363, and caused the fatally defective resolution to be registered on 2 February 2022. This course of conduct was similarly reprehensible.
[126] Through its unlawful conduct, United (and those in control of United, as well as Truval who was a related party) was able to manipulate the date of the commencement of the liquidation to be 2 February 2022, which placed the aforesaid highly suspicious transactions between United and Truval during March and April 2021 conveniently outside the six-month period referred to in section 29 of the Insolvency Act.
[127] Under the circumstances I am persuaded that there are circumstances which make it undesirable for United’s winding-up to continue on the basis of the purported voluntary liquidation. In my mind, keeping the voluntary liquidation in place would amount to a travesty of justice. Consequently, even to the extent that I have a limited discretion, I have no hesitation in exercising my discretion in favour of the setting aside of the winding-up.
Truval’s argument that Enyuka’s claim has prescribed by the time the application was heard, and that Enyuka has lost locus standi
[128] When the matter was set down for hearing before me during November 2024, Truval sought leave to deliver a supplementary affidavit in which further issues were raised. The parties consented to an order allowing the supplementary affidavit and providing time for Enyuka to deliver an affidavit in reply. Such order was made, and Enyuka subsequently delivered a replying affidavit.
[129] The issue which Truval sought to raise in its supplementary affidavit was that Enyuka’s claim allegedly prescribed by the time the supplementary affidavit was filed. In this regard, Truval relied on Misnun's Heilbron Roller Mills Holdings (Pty) Ltd v Nobel Street Central Investments (Pty) Ltd29 in which Goldstone J held that an application for liquidation is not a legal process in which the payment of a debt is claimed which may interrupt the running of prescription in terms of section 15(1) of the Prescription Act 1969. Consequently, an applicant’s claim can prescribe while a liquidation application is pending, and if the claim has prescribed, a liquidation order cannot be granted.
[130] Truval’s submission was that the rent owing by United to Enyuka was payable at the latest by 1 May 2021 and prescribed about three years later (there was a short period before the liquidator was appointed that prescription did not run), before the matter was heard.
[131] Consequently, it was contended that Enyuka no longer had locus standi to bring an application for the setting aside of the winding-up in terms of section 354. Paradoxically, Truval still has no objection against a compulsory winding-up order being granted against United on Enyuka’s application.
[132] Enyuka responded to this new line of defence with a number of responses. It is not necessary to deal with all these responses. Enyuka’s main response was that, assuming that its claim for rent had become prescribed in amount May 2024, in terms of the agreements of lease, it was agreed that United would pay interest on all arrear amounts. Enyuka referred to the specific clauses in the leases, which read as follows:
“Without prejudice to and in addition to the other rights and remedies of the landlord, the tenant shall pay the landlord interest on any moneys due but unpaid by the tenant to the landlord in terms of this lease, such interest to be calculated at the rate of 2% (two per centum) per annum higher than the prime rate of interest levied by the landlord's bank to the landlord, provided that the interest payable by the tenant to the landlord shall not be less than 10% (ten per centum) per annum, and such interest shall be compounded monthly from the due date for payment of the moneys in respect of which the interest is chargeable until the payment of such moneys in full.
and
“If the Tenant fails to pay its Total Monthly Rental or any other charges on due date, the Landlord shall charge the Tenant and the Tenant shall pay on demand interest on overdue sums at the rate of the publicly quoted basic prime rate of interest at which First National Bank will lend funds on overdraft plus 5% (five percent) compounded, per annum or part thereof.”
[133] In terms of the first variation of the relevant clause, interest on arrears would be compounded monthly, which in essence means that it would be calculated and capitalised monthly. In terms of the second variation, the interest must be compounded yearly. Mr Both submitted on behalf of Enyuka that capitalised interest does not lose its character as interest; despite the fact that it is capitalised, it retains it character as interest. In this regard he relied on Standard Bank of SAs Ltd v Oneanate Investments (Pty) Ltd 30. Consequently, even if it is assumed that the capital amount due prescribed during May 2024, the interest that accrued from May 2021 to May 2024 had not prescribed.
[134] Mr Silver submitted on behalf that Enyuka’s claim for the arrear rent and interest is a single claim, and submitted that because the interest had been capitalised, the entire claim had become prescribed. The argument that the accrued interest had become prescribed because it was capitalised, is rejected. As submitted by Mr Both, interest does not become part of the capital because it is “capitalised”. This was confirmed by the Supreme Court of Appeal in Standard Bank of South Africa Ltd v Oneanate Investments (Pty) Ltd (In Liquidation).31
[135] Capitalisation of interest simply means that the interest is added to the capital for purposes of calculation of further interest. This means that after “capitalisation” interest is charged on the capital amount, but interest is also charged on interest. That does not change the capital component of the debt, also known as “the principal debt” in certain contexts. This principle is important for an understanding of the common law in duplum-rule, section 103(5) of the National Credit Act, and the calculation of effective interest rates where there is a statutory maximum interest rate.32 It is also important as far as prescription of the interest is concerned.
[136] Interest that accrued until May 2021 could have potentially prescribed by the time this matter was heard. I make no finding on this, as there may be other reasons why the interest, and for that matter the capital, have not prescribed. If the interest did prescribe, it prescribed because the relevant prescription period had elapsed in respect of the interest debt without interruption, not because the interest became part of the capital. Truval’s argument in this regard was also no answer for the proposition that the interest that accrued during the prescription period had not become prescribed yet.
[137] I am constrained to deal with an aspect neither party had addressed in argument, which is the potential effect of section 10(2) of the Prescription Act, 1969. This section provides as follows:
“By the prescription of a principal debt a subsidiary debt which arose from such principal debt shall also be extinguished by prescription.”
[138] In Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd it was held that the interest claimed in that matter constituted a “subsidiary debt” for purposes of this section.33 The court ruled that certain portions of the capital prescribed, because the simple summons did not interrupt prescription in respect of all the claims. Consequently, it was held that the interest that accrued on the prescribed debts, also prescribed. On appeal, the Supreme Court of Appeal reversed the ruling that the capital prescribed, on the basis that the simple summons did interrupt prescription. Consequently, the court a quo’s decision on the prescription of the interest component automatically fell by the wayside and was not discussed on appeal.
[139] I am in respectful disagreement with the reasoning that interest that accrue on an outstanding debt by agreement constitutes a “subsidiary debt”. As was pointed out in Oneanate, “subsidiary debt” is not defined in the Prescription Act. I am of the view that “subsidiary debt” simply means a debt, the existence of which is dependent on the existence of another debt. In this regard, I am of the view that it was intended to include debts or obligations of an accessory nature, like most forms of obligations emanating from security instruments, like deeds of suretyship, mortgage bonds, notarial bonds and cessions in securitatem debiti. If a principal debt prescribed, such accessory debt also prescribed.
[140] There is obviously a close connection between a principal obligation and the accrual of interest: interest can obviously not accrue if the principal debt is not in existence. Thus, if the principal debt has become prescribed, from the date prescription set in, no further interest can accrue. However, any interest that accrued before the principal debt became prescribed has an existence of its own. The date upon which interest became due is also different from the date the principal debt became due. Interest that has been due for more than the relevant period of prescription would prescribe, not because it is subsidiary to the principal debt, but because it has prescribed according to the applicable principles of the Prescription Act.
[141] It was also held by the court a quo in Oneanate that interest must of necessity be regarded as a subsidiary debt for purposes of section 10(2), because if this is not the case, interest will continue to run on the principal debt, despite the fact that the principal debt has prescribed, and that the only way the interest can be stopped would be to pay the principal debt, even though the debt had prescribed. This was held to be contrary to, and undermining the intention of the legislature, which intended the principal debt to become prescribed. In this regard, the court referred to Estate Obermeyer v Estate Wolhuter34 and Suid-Afrikaanse Nasionale Lewensassuransiemaatskappy v Rainbow Diamonds (Edms) Bpk en Andere35.
[142] However, the Rainbow Diamonds-case is no authority for this line of reasoning. The court expressly held that the claim for interest had a different cause of action as the claim for the capital and held that the interruption of the claim for the capital did not interrupt the claim for interest. The court clearly regarded the two claims as distinct claims. The court refrained from expressing a final judgment on the question whether interest must be regarded as a subsidiary debt as intended in section 10(2). On a proper analysis of this judgment, the ratio of this judgment is that capital and interest are separate claims, which can prescribe independently from each other and in respect of which prescription can be interrupted separately.
[143] As far as Estate Obermeyer v Estate Wolhuter is concerned, caution must be exercised in relation to decisions under earlier versions of the Prescription Act. There is already a difference in the legal effect of prescription between the Prescription Act, 1943 and the Prescription Act, 1969. In terms of the 1943 Act prescription was regarded as merely a procedural bar to the enforcement of a claim (the claim was merely unenforceable), while the 1969 Act is based on the idea that a claim is extinguished by prescription. If prescription is a procedural bar only, it can be reasoned that interest continue to accrue despite the principal debt having prescribed, and that interest which accrued on the principal debt must suffer the same fate as the principal obligation.
[144] Estate Obermeyer v Estate Wolhuter was decided in 1927 in terms of the common law, which was stated to be to the effect that if the principal debt prescribed, the interest thereon is prescribed with it. However, this general statement was inaccurate, as in the same judgment, it was qualified (albeit with reference to some English authority) by the statement that if the principal debt is barred by the statute of limitations, the claim for future interest ceases with it. Qualified in this manner, there can be no quarrel with the approach; it would indeed be startling if after a debt became prescribed interest could continue to run on it.
[145] It was argued in Estate Obermeyer v Estate Wolhuter that where the legal position was at the time that a prescribed debt was merely procedurally unenforceable, as opposed to extinguished, interest would continue to run after prescription. This was rightly rejected by the court, by pointing it out that if the running of interest is not stopped, this would mean that a debtor would have to pay a prescribed debt to stop the interest, which is unacceptable. The court’s judgment was to the effect that upon the principal debt prescribing, the running of further interest on the debt ceases. The judgment was not to the effect that upon the principal prescribing all interest that accrued also prescribed. The judgment is confined to future interest after the principal debt prescribed.
[146] I am of the view that what was said in Estate Obermeyer v Estate Wolhuter was quoted out of context by the court a quo in Oneanate and that the court, with respect, expressed itself too generally in relation to the alleged accessory nature of interest and the applicability of section 10(2) of the Prescription Act, 1969.
[147] In the premises, the effect of section 10(2) is not to extinguish all interest that accrued on a prescribed debt. In fact, there is no need to involve section 10(2) in respect of interest to realise the purpose of the Act. The principle is simply that in terms of the Act, a prescribed debt is extinguished, and further interest can obviously not accrue on an extinguished debt. Alternatively, the application of section 10(2) on a proper interpretation is confined to interest which may accrue after prescription of the principal debt has set in.
[148] Consequently, I hold that in respect of interest that accrued from May 2021, there is a substantial amount due to Enyuka by Truval, which has not prescribed.
[149] Truval’s counsel pre-empted this possible finding by arguing that the running of interest is prohibited by section 50(1) of the Insolvency Act, 1936 from the date of liquidation, i.e. 2 February 2022. This section provides that a creditor can recover interest only to the date of sequestration / liquidation. On this argument all interest that accrued after 2 February 2022 could not be recovered. Mr Silver, on behalf of Truval, however, properly conceded that if the liquidation is set aside, this argument loses any traction. As I have found that the special resolution, and the registration thereof was void ab initio, and ought to be set aside, there is indeed no merit in the reliance on section 50.
[150] A further argument raised by Mr Both, on behalf of Enyuka, relates to the content of Truval’s answering affidavit in the present matter, which was delivered on 22 November 2023. This affidavit was deposed to by Mr Burgin, who pointedly stated that he was a member of both United and Truval, and at that stage the sole member of Truval. The founding affidavit in this application in essence incorporated the initial liquidation application, with its founding affidavit, in which the allegation was made that United was indebted to Enyuka, and was unable to pay its debts. Mr Both’s argument is that Burgin, while expressly stating that he was a member of both entities, did not make any attempt in the answering affidavit to deny United’s liability to Enyuka, and that this must be taken as at least a tacit acknowledgement of debt for purposes of the interruption of prescription in terms of section 14(1) of the Prescription Act, 1969, by United. If this contention is correct, prescription would, in terms of section 14(2), start running afresh from the date of the acknowledgement.
[151] In my view, this affidavit must be read in the context of the case as a whole. In United’s answering affidavit in the initial liquidation application, deposed to by Mr Steiner, United admitted the debt in question, but raised the unsustainable defence, which ought to be rejected out of hand, that the debt was owing to the relevant mortgagees. In my view, United’s answering affidavit must be regarded as at least a tacit acknowledgement of debt for purposes of section 14(1). This affidavit was delivered in August 2021, being more than three years ago, with the result that it does not directly assist Enyuka. However, against the background that United never disputed the existence of the debt, except for raising opportunistic and unfounded issues, Bergin’s affidavit in the present matter must be considered. As indicated, he starts off by stating that he is a member of both United and Truval. Then in response to an application that encompasses both the compulsory liquidation of United, in which allegations of indebtedness is made, and the setting aside of the voluntary liquidation of United, he does not deny United’s indebtedness. Care must be taken not to infer a tacit acknowledgement of debt from silence, but where in terms of the rules of court a litigant is obliged to respond with positive evidence, otherwise an allegation can be regarded as admitted, Bergin’s response should be seen as a tacit acknowledgement of debt. The fact that Bergin’s affidavit constituted Truval’s answering affidavit is neither here nor here. It is now trite law that a deponent to an affidavit in motion proceedings does not do so as a representative of the party, it does so as a witness.36 Bergin, stating the he is a member of both United and Truval depose to an affidavit as a witness in which it can be expected that he would deny United’s liability, if he could do so legitimately, but he refrains from denying liability. As such it must be taken as a tacit admission of liability by United. As such, in terms of section 14(1), prescription started running afresh during November 2023.
[152] I also find Truval’s approach to this issue duplicitous. In heads of argument filed in this matter, as well as during oral argument, Truval conceded that a compulsory winding-up order should be granted. The only basis upon which that can be done, is if United is indebted to Enyuka. Truval in essence only opposed the application for the setting aside of the voluntary winding-up. Truval’s approach can only be based on an acknowledgement that United is indeed indebted to Enyuka.
[153] A number of other responses were raised by Enyuka, which need not be traversed, in view of the findings above.
[154] Under the circumstances, the contention that Enyuka’s claim has become prescribed is rejected.
Ancillary orders in connection with the winding-up set aside herein
[155] The reality of the voluntary winding-up is that liquidators were appointed, who did work in connection with the winding-up. They incurred certain expenses, which will become fruitless as a result of the setting aside of the voluntary winding-up. They also eventually collected some debtors of United which were initially concealed by United. In this regard the liquidators would have been entitled to a fee.
[156] However, it must have been abundantly clear to the liquidators that the purported voluntary winding-up was void ab initio. They received a statement of affairs in support of the winding-up which was evidently grossly non-compliant and misrepresented the extent of the United’s creditors (the debt to the various lessors were simply omitted). The evidence is that the liquidators knew that the statement of affairs was deficient. They must also have known that the special resolution did not comply with sections 199 and 200 of the CA 1973.
[157] Section 354 of the CA 1973 also gives a liquidator locus standi to apply for the setting aside of a winding-up. I am of the view that the liquidators had the duty to apply for the setting aside of the winding-up under circumstances where the invalidity of the winding-up was glaringly obvious. However, they simply continued with the winding-up regardless. When they were requested by Enyuka’s attorneys to agree to a suspension of all proceedings in the winding-up, pending finalisation of this application, they never unequivocally agreed to a suspension of proceedings. They simply indicated that they would request the Master for an extension to file the liquidation and distribution account. While their assent to suspend proceedings can be inferred from their conduct, their responses were duplicitous and far from the straightforwardness to be expected from a liquidator.
[158] Whilst there is no evidence of collusive dealings between the liquidators and United and / or Truval herein, it is an unfortunate fact that liquidators are sometimes complicit in the implementation of a liquidation which does not have as its purpose the benefit of the general body of creditors, but indeed the purpose of perpetrating a fraud on them. Consequently, liquidators should be astute to scrutinise the question whether a voluntary liquidation was obtained validly and should refrain from implementing a winding-up which was evidently improperly obtained, lest it be said that they were complicit in perpetrating a fraud on the general body of creditors.
[159] Under the circumstances, there is no reason why the liquidators should be accommodated as far as the recovery of costs and fees are concerned, and they should be ordered to hand over all documentation and funds collected, without deduction, to the liquidators that will be appointed pursuant to this order.
Costs
[160] It will be clear from what has been set out above, that Truval’s conduct has been reprehensible on multiple levels.
[161] Under the circumstances Truval should be ordered to pay the costs of this application on a punitive scale, including the cost of counsel on Scale C
[162] Truval has argued that it should be granted the costs of the application for intervention, which was unsuccessfully opposed by Enyuka, regardless of the cost in the main application. In the application for intervention, in support of the contention that it had a legal interest in the present matter, Truval relied on the on the same grounds its opposition to this application was based on. Already when the intervention order was granted, Le Grange AJ remarked that Truval’s grounds for opposing this application, as set out in the intervention application, was doubtful, but that it did have a legal interest justifying granting leave to intervene. Truval would have been entitled to amplify it’s case in the answering affidavit herein (for example by placing further admissible documentary evidence before the court demonstrating compliance with the relevant legislation), but in the event Truval’s answering affidavit in the present application was basically a copy of its half-baked founding affidavit in the intervention application. Truval should never have opposed this application and should, consequently, never have brought the application for intervention. Truval’s opposition to this application was an attempt to benefit from it own reprehensible conduct and was similar to the reprehensive delaying tactic United employed in the winding-up application. Again, it is of importance that these entities were controlled by the same individuals and represented by the same attorneys. Under the circumstances, I can see no reason why Truval should not also be ordered to pay the cost of the intervention application on the same scale as the rest of the costs.
Order
[163] Consequently, the following order is hereby granted:
a. The special resolution for the voluntary liquidation of the first respondent, United Merchants CC (registration number 1993/013877/23) dated 6 December 2021, including the statement of affairs ("CRS(a)" and "CRS(b)" to the founding affidavit) and the registration thereof with the fifth respondent on 2 February 2022 is declared to be void ab initio;
b. In terms of section 354 of the Companies Act 61 of 1973 the voluntary liquidation of the first respondent pursuant to the registration of the special resolution ("CR5(a)" to the founding affidavit) is hereby set aside;
c. The appointment of the second and third respondents as the joint liquidators of the first respondent is declared void ab initio and set aside;
d. The first respondent, United Merchants CC (registration number 1993/013877/23), is placed under winding-up in the hands of the Master of the High Court;
e. It is declared that that the winding-up ordered above commenced on 25 June 2021 in terms of section 348 of the Companies Act, 1973;
f. The fourth respondent is directed to appoint a provisional liquidator or liquidators for the first respondent;
g. The fourth and fifth respondents are ordered to adjust their records to reflect the consequences of the orders above;
h. The second and third respondent are ordered to deliver upon demand all records in respect of the first respondent, and make payment, without deduction, of all funds held by them in the winding-up that was declared void and set aside in terms of this order to the provisional or final liquidators appointed pursuant to this order;
i. The intervening party, Truval Manufacturers CC, is ordered to pay the costs of this application on the attorney and client scale, including the cost of counsel on Scale C, including all costs that were reserved in this matter.
________________________________
DAWID MARAIS
ACTING JUDGE OF THE HIGH COURT
JOHANNESBURG
For the Applicant: | Adv J Both SC instructed by Kokinis Inc |
For the Intervening Party: | Adv M Silver instructed by Moss Cohen and Partners |
Date heard: | 25 February 2025 |
Additional written argument filed: | 14 March 2025 |
Judgment delivered: | 4 July 2025 |
1 Section 348 of the CA (1973) provides that “A winding-up of a company by the Court shall be deemed to commence at the time of the presentation to the Court of the application of for the winding-up,”; See also Development Bank of Southern Africa Ltd v Van Rensburg and Others NNO 2002 (5) SA 425 (SCA).
2 Section 352 of the CA (1973).
3 King Pie Holdings (Pty) Ltd v King Pie (Pinetown) (Pty) Ltd; King Pie Holdings (Pty) Ltd v King Pie (Durban) (Pty) Ltd 1998 (4) SA 1240 (D)
4 Section 340 CA (1973); Afrisam (South Africa) Proprietary Limited v Maleth Investment Fund Proprietary Limited 2019 JDR 2519 (SCA)
5 Badenhorst v Northern Construction Enterprises (Pty) Ltd 1956 (2) SA 346 (T) at 347 – 349; reaffirmed by the SCA in Kalil v Decotex (Pty) Ltd and Another 1988 (1) SA 943 (A) at 980B; Trinity Asset Management (Pty) Ltd v Grindstone Investments 132 (Pty) Ltd 2018 (1) SA 94 (CC)
6 Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA)
7 Section 344 and 345.
8 See Scania Finance Southern Africa (Pty) Ltd v Thomi-Gee Road Carriers CC and Another 2013 (2) SA 439 (FB) which was followed in Body Corporate Santa Fe Sectional Title Scheme NO 61/1994 v Bassonia Four Zero Seven CC 2018 (3) SA 451 (GJ)
9 Boschpoort Ondernemings (Pty) Ltd v Absa Bank Ltd 2014 (2) SA 518 (SCA)
10 Despite the current definition of “Companies Act” in the CCA, this must be interpreted as a reference to the CA (1973).
11 Carstens v Millennium Clutch Manufacturing (Pty) Ltd 2016 JDR 1868 (GJ)
12 Par 3.
13 Wild & Marr (Pty) Ltd v Intratek Properties (Pty) Ltd 2019 (5) SA 310 (GJ)
14 Van der Merwe v Duraline (Pty) Ltd [2013] ZAWCHC 213
15 Par 13.
16 C Pro Construction (Pty) Ltd v Caliber Devco CC 2018 JDR 1527 (GP) par 27.
17 Supra, par
18 Botha NO v Van den Heever NO 2012 JDR 1202 (GNP).
19 Steenkamp and Others v Edcon Ltd 2016 (3) SA 251 (CC) par [16]. And see Metro Western Cape (Pty) Ltd v Ross 1986 (3) SA 181 (A), which was followed in Edcon.
20 Ward and Another v Smit and Others: In re Gurr v Zambia Airways Corporation Ltd 1998 (3) SA 175 (SCA)
21 Herbst v Hessels NO en Andere 1978 (2) SA 105 (T)
22 The Constitution of the Republic of South Africa, 1996
23 See Commissioner, South African Revenue Service v Nyhonyha and Others 2023 (6) SA 145 (SCA) par 22
24 Ex parte Strip Mining (Pty) Ltd: In re Natal Coal Exploration Co Ltd (In Liquidation) (Kangra Group (Pty) Ltd and Another Intervening) 1999 (1) SA 1086 (SCA)
25 See CaseLInes 016-44
26 See Michelin Tyre Co (South Africa) (Pty) Ltd v Janse van Rensburg and Others 2002 (5) SA 239 (SCA).
27 Dabelstein and Others v Lane and Fey NNO 2001 (1) SA 1222 (SCA)
28 Par 7.
29 Misnun's Heilbron Roller Mills Holdings (Pty) Ltd v Nobel Street Central Investments (Pty) Ltd 1979 (2) SA 1127 (W) And see Santino Publishers CC v Waylite Marketing CC 2010 (2) SA 53 (GSJ); The Body Corporate of the Santa Fe v Bassonia Four Zero Seven CC 2019 JDR 0516 (GJ).
30 Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd 1995 (4) SA 510 (C)
31 Standard Bank of South Africa Ltd v Oneanate Investments (Pty) Ltd (In Liquidation) 1998 (1) SA 811 (SCA)
32 For example, if the agreed rate of interest is 20% per annum, compounded monthly, the effective interest rate per annum is 21.94% per annum.
33 Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd 1995 (4) SA 510 (C) at 557
34 Estate Obermeyer v Estate Wolhuter 1928 CPD 32
35 Suid-Afrikaanse Nasionale Lewensassuransiemaatskappy v Rainbow Diamonds (Edms) Bpk en Andere 1982 (4) SA 633 (C) at 643E-G.
36 Unlawful Occupiers, School Site v City of Johannesburg 2005 (4) SA 199 (SCA), following Eskom v Soweto City Council 1992 (2) SA 703 (W)
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