A discussion of the requirements of a trial of a serious question of consequence and the best interests of the company as contemplated in section 165(5)(b) of the Companies Act 71 of 2008

by | Nov 28, 2020 | JCCL, JCCL V6 I1

A discussion of the requirements of a trial of a serious question of consequence and the best interests of the company as contemplated in section 165(5)(b) of the Companies Act 71 of 2008

Authors Darren Subramanien

ISSN: 2521-2575
Affiliations: Lecturer School of Law (PMB), University of KwaZulu Natal
Source: Journal of Corporate and Commercial Law & Practice, Volume 6 Issue 1, 2020, p. 1 – 23

Abstract

The requirements for judicial discretion to grant leave for a derivative  action are located in s 165(5)(b) of the Companies Act 71 of 2008. The  discretion of the court must be exercised to prevent time-consuming  and costly actions that are deemed to be frivolous, vexatious or  without merit. In terms of s 165(5)(b) the court must be satisfied that  the applicant is acting in good faith, that the proceedings involve the  trial of a serious question of material consequence to the company,  and that it is in the best interests of the company that the applicant  be granted leave. It would therefore be open to the courts to provide  an interpretation of the words in s 165(5)(b) regarding the good faith  requirement, to find that the proceedings involve a serious question  of material consequence to the company, and to find that it is in the  best interests of the company that the applicant be granted leave.  This article discusses the requirements of ‘a trial of a serious question  of consequence’ and the ‘best interests of the company’ in s 165(5)(b)  of the Act. The interpretation of these words and phrases in s 165(5)(b)  will ultimately determine the success or failure of the new statutory  derivative action as an adequate remedy for aggrieved applicants  who seek redress on the company’s behalf if the company or those in  control of it improperly fail or refuse to do so. This article will refer  to the relevant sections in the law of the United Kingdom to provide further clarity about the interpretation of the relevant provisions in  s 165(5)(b) of the Companies Act 71 of 2008. 

Board autonomy and recourse to the courts in south africa

by | Nov 28, 2020 | JCCL, JCCL V6 I1

Board autonomy and recourse to the courts in south africa

Authors Genevieve Paige Wagener

ISSN: 2521-2575
Affiliations: Attorney of the High Court of South Africa
Source: Journal of Corporate and Commercial Law & Practice, Volume 6 Issue 1, 2020, p. 24 – 39

Abstract

In the aftermath of the recent comments made by the chairperson  of the Old Mutual Ltd board that the board cannot be dictated to by  the court on matters of corporate governance, it must be clarified  that the Constitution still grants anyone the right to have a legal  dispute settled by a court or other independent and impartial forum  or tribunal if the legal dispute is justiciable and if the party has legal  standing in relation to such dispute. 

Possible manipulation of the ‘solvency and liquidity’ test under the Companies Act makes the test an ineffective alternative to the ‘maintenance of capital’ principle

by | Nov 28, 2020 | JCCL, JCCL V6 I1

Possible manipulation of the ‘solvency and liquidity’ test under the Companies Act makes the test an ineffective alternative to the ‘maintenance of capital’ principle

Authors Joshua Sasha Kadish

ISSN: 2521-2575
Affiliations: Attorney at Fluxmans Inc
Source: Journal of Corporate and Commercial Law & Practice, Volume 6 Issue 1, 2020, p. 40– 53

Abstract

This article argues that although great strides have been made with the  abolition of the maintenance of capital principle and its replacement  by the solvency and liquidity test, the possible manipulation of the  latter test raises questions about whether it is an adequate alternative  to the maintenance of capital principle. 

The continued relevance of the Turquand Rule under the current company law regime in South Africa

by | Nov 28, 2020 | JCCL, JCCL V6 I1

The continued relevance of the Turquand Rule under the current company law regime in South Africa

Authors Jacquiline Mujulizi

ISSN: 2521-2575
Affiliations: Advocate of the High Court of Tanzania
Source: Journal of Corporate and Commercial Law & Practice, Volume 6 Issue 1, 2020, p. 54 – 65

Abstract

The statutory enactment of the Turquand rule in s 20(7) of the  Companies Act 71 of 2008 raises questions about the continued  relevance of the common-law Turquand rule in South African law. As  the common-law rule addresses aspects of the accepted presumption  that can, legitimately, be made by third parties on the company’s  compliance with procedural or administrative requirements, its  continued relevance and application can hardly be questioned, as  argued in this article. 

Good corporate governance affirms the board (led by the chairperson) as the focal point of governance and the courts have no mandate to undermine this principle

by | Nov 27, 2020 | JCCL, JCCL V6 I1

Good corporate governance affirms the board (led by the chairperson) as the focal point of governance and the courts have no mandate to undermine this principle

Authors Tsepiso Mofokeng

ISSN: 2521-2575
Affiliations: Executive Chairman, Mofisto Investments (Pty) Ltd
Source: Journal of Corporate and Commercial Law & Practice, Volume 6 Issue 1, 2020, p. 66 – 79

Abstract

Corporate governance has long been endorsed globally as a key  factor in the survival or success of every corporation. The failure  of international companies like Arthur Anderson and Enron serves  to reinforce the argument that the courts have a role to play in  circumstances where the board has failed to carry out its functions.  This will be argued by referring to the importance of the prescribed  legislation and the King Codes, and more specifically, King IV as a  watchdog of good governance, often cited in court decisions where  governance is in issue. Reference will also be made to relevant case  law to emphasise the role of the courts in this regard.