Case Name:
Blue Square Advisory Services (Pty) Ltd v Madingoane Pogiso and others Case number 01082/2011 (South Gauteng High Court Judgment per Peter AJ)
Area of law:
Company law and Trusts (voting at general meeting and the passing of resolutions).
Brief facts/summary:
In this case a Trust ( “Johan en Mercia Louw Familie Trust”) (“the Trust”) was a 100% shareholder of a Company ( Blue Square Advisory Services (Pty) Ltd) and entered into a number of (unproven) verbal agreements with the 2 Respondents in respect of which the two Respondents (prospective BEE partners) would become directors and shareholders of the Company.
The relationship between the Applicant and the 2 respondents eventually broke down to such an extent that the learned Judge described what transpired between the parties as “echoing the Western Schism that divided Europe at the end of the 14th and the beginning of the 15th Centuries with rival papacies of Avignon and Rome furiously denouncing and excommunicating each other”.
Thereafter the a trustee acting on behalf of the trust called a general meeting in terms of s 220 of the Companies Act (1973) in order to pass a resolution to dismiss both respondents as directors. The resolution was passed and the respondents were dismissed in terms thereof.
The crisp issue before the court was the validity of this resolution.
The court held that is settled law that a Trust is not a legal person , it is simply a legal relationship and legal relationship is incapable of owning anything.
Further, in order for the resolution to be valid it had to be taken at a general meeting and passed by the members of the Company.
In the register of the company only the name of the Trust was shown, not the names of any of the trustees.
S103(2) of the 1973 Companies Act requires the name of the member to be in register.
The learned Judge held that the applicant (ie the Trust) and the trustees were the authors of their own misfortune in that they chose to keep the names of the trustees off the register and then attempt to exercise the rights accorded only to members as if their names were reflected on the register. NB IT IS THE TRUSTEES WHO ARE THE OWNERS OF THE SHARES – TO THE EXTENT THAT THE SHARES ARE TRUST ASSETS ONE OR MORE OF THE TRUSTEES NAMES OUGHT TO HAVE BEEN REFLECTED ON THE REGISTER IN ORDER TO EXERCISE THE VOTING RIGHTS ATTCHING TO THE STATUS OF A MEMBER.
Thus the resolution passed for the removal of the respondents as directors was declared to be invalid.
Please note that this case dealt with the 1973 Companies Act as the 2008 Act had not yet come into force and does not apply retrospectively.
Application may be different in terms of the 2008 as a “Person” is defined in the new act to include a juristic person, and a juristic person is defined to include a Trust. The Learned Judge unfortunately did not examine the situation under the new Companies Act.
Importance/value:
Make sure that wherever a Trust is registered as a member of a Company that at least one trustee’s name is written in the register in order that he/she may validly vote at meeting of the members of the company and further ensure that the appropriate resolution is taken by the trustees of the trust authorising that trustee specifically to vote at the meetings of the company on behalf of the trust.
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