BACKGROUND AND SUMMARY
Heatherview Estate Extension 24 Home Owners Association (NPC) (the “Applicant”) brought an urgent application before the High Court of South Africa, Gauteng Division, Pretoria (the “Court”) seeking relief against the Respondents in the matter, being a group of 56 displeased members of the Applicant.
The relief sought by the Applicant, included inter alia that:
- the purported shareholders meeting held on 25 March 2019(the “Meeting”) be declared unlawful and invalid;
- all resolutions allegedly adopted at the Meeting be declared unlawful and void; and
- that the 1st to 56th Respondents be interdicted and restrained from holding themselves out to be directors of the Applicant and exercising any of the powers of the directors of the Applicant.
On 20 February 2019, the Respondents attached a notice (the “Notice”) for an annual general meeting of the Applicant (the “AGM”) to the main entrance of the township. The following day, the Respondents legal representatives sent a notice (the “s61(3) Notice”) on the Respondents’ behalf, in terms of Section 61(3) of the Companies Act, 71 of 2008 (the “Act”) to the then board of directors of the Applicant, requesting that they convene a meeting of members. No response was received to the s61(3) Notice by the board of directors or managing agent of the Applicant. Subsequently and on 22 February 2019, the s61(3) Notice was circulated amongst those members of the Applicant who were part of a WhatsApp group, allegedly forming part of the majority of the members of the Applicant. By 17 March 2019, each homeowner was directly approached and were provided with a copy of the S61(3) Notice.
On 25 March 2019, the Respondents convened the Meeting wherein resolutions were purportedly adopted to, inter alia, remove and substitute the directors of the Applicant, as well as the manager of the Applicant and to amend the Articles of Association (the “AOA”) of the Applicant by removing a clause which prohibited members of the Applicant from voting, in the event that they did not pay their levies.
The Applicant alleges that the Respondents unlawfully and in contravention of both the Act and the AOA convened the AGM and adopted the aforesaid resolutions. The Applicant based this on the fact that there was not proper notice given of the AGM, there was no quorum being present at the alleged AGM and that the Respondents were barred from voting in terms of the AOA. The Applicant further alleged that the Respondents still went ahead with their actions, despite being aware of the fact that they were not permitted to resort to “self-help” and should have approached a Court for an order that the directors convene such the Meeting, having already applied to the Community Schemes Ombud Service, which application is still pending, for an order of this exact nature whereby the Respondents have attempted to obtain the same relief through the “unlawful self-help” AGM.
The Applicant submitted that where the board of directors fails to convene a meeting in response to a notice in terms of s61(3) of the Act, the members of the Applicant are required to approach a court in terms of s61(12) of the Act. The Respondents, however, were of the view that, as section 61(12) of the Act makes use of the word “may”, they were not obliged to approach the Court and thus they convened the AGM themselves.
The Court considered the provision of section 61 of the Act and held that, whilst shareholders or members may in terms of section 61(3) request the board of directors to convene a meeting, it is the board of directors that must in fact do so and where the shareholders or members convene the meeting themselves, it is unlawful. The remedy of the shareholder or members, where the directors refuse or fail to convene a meeting on request in terms of section 61(3) lies in section 61(12), which is for said members to approach a court, in which case, it is still not guaranteed that the court would order that a meeting be convened. It therefore follows that the AGM was unlawfully held.
The Court granted the Applicant’s relief sought as set forth herein above and the Respondents were ordered to pay the costs of the application.
S61 of the Act, does not provide for members or shareholders of a non-profit organisation to convene a meeting themselves, in the event that the board of directors fails or refuses to convene a meeting, and if said meeting is convened, without the relief sought from the court being granted, the meeting convened by the shareholders or members, is in fact unlawful. Section 61 of the Act, does not provide for members or shareholders of a non-profit organisation to convene a meeting out of their own accord, in the event that the board of directors fail or refuse to convene a meeting, and if said meeting is convened, without the relief sought from the court being granted, the meeting convened by the shareholders or members, is in fact unlawful.
Written by Courtney Altmuner Checked by Jeannique Booysen
1 November 2019