Identifying the missing link in section 81(1)(d)(iii) of the Companies Act 71 of 2008: A case for innovative approach to handling solvent companies overwhelmed by deadlock

Authors Shandukani Muthugulu-Ugoda

ISSN: 2521-2605
Affiliations: University of Fort Hare
Source: Journal of Comparative Law in Africa, Volume 5 Issue 1, p. 110 – 134


The winding-up provisions in sections 79—81 of the Companies 71 of 2008 pertaining to solvent companies have been the subject of pivotal judgments in recent times. There are two areas of this judicial trend that call for academic commentary.The first is clarification of the deadlock principle, as well as the breath and scope of the ‘just and equitable’ ground for winding-up in terms of section 81(1)(d)(iii) of the Act. The second and most critical aspect relates to the ‘missing link’ in section 81(1)(d)(iii). This link refers to the lacuna arising from the fact that the just and equitable winding-up provisions do not countenance any deviation from the statutory prescriptions once the factual grounds for just and equitable winding-up have been established. The real problem with this drastic remedy lies in the bludgeoning of a solvent company because of corporate paralysis. To that extent, the absence of a purpose-built shotgun remedy to tackle corporate stalemate suggests that the relevant provisions operate out of step with modern developments in other jurisdictions. This article argues that section 81(1)(d)(iii) is in dire need of reform to bring it in line with the spirit, purport and objects of the Companies Act, especially those behind Chapter 6 of the Act, which has introduced the innovative business rescue mechanism into the South African corporate law landscape.